oversight

The Crisfield Housing Authority, Crisfield, MD, Did Not Properly Administer Its Public Housing Program Operating and Capital Funds

Published by the Department of Housing and Urban Development, Office of Inspector General on 2018-09-25.

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

            Crisfield Housing Authority,
                    Crisfield, MD
   Public Housing Program Operating and Capital Funds




Office of Audit, Region 3     Audit Report Number: 2018-PH-1007
Philadelphia, PA                              September 25, 2018
To:            Russell DeSouza, Director, Office of Public Housing, Baltimore Field Office,
               3BPH
               Craig T. Clemmensen, Director, Departmental Enforcement Center, CACB
               //signed//
From:          David E. Kasperowicz, Regional Inspector General for Audit, Philadelphia
               Region, 3AGA
Subject:       The Crisfield Housing Authority, Crisfield, MD, Did Not Properly Administer Its
               Public Housing Program Operating and Capital Funds


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 Crisfield Housing Authority’s public housing
program operating and capital funds.
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 website. 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
215-430-6734.
                       Audit Report Number: 2018-PH-1007
                       Date: September 25, 2018

                       The Crisfield Housing Authority, Crisfield, MD, Did Not Properly
                       Administer Its Public Housing Program Operating and Capital Funds




Highlights

What We Audited and Why
We audited the Crisfield Housing Authority’s use of public housing program operating and
capital funds because we received a hotline complaint alleging misuse of public housing assets
and we had never audited the Authority. The audit objective was to determine whether the
Authority administered its public housing program in accordance with applicable U.S.
Department of Housing and Urban Development (HUD) requirements and its annual
contributions contract.

What We Found
The Authority did not properly administer its public housing program according to applicable
HUD requirements and its annual contributions contract. It did not (1) properly administer its
operating funds, (2) comply with conflict-of-interest requirements, and (3) comply with capital
fund requirements. As a result, the Authority’s use of operating funds totaling $137,500 for
security services and more than $1.4 million for unit repairs were unsupported and it made
ineligible payments totaling $111,568 for unit repairs and repairs to its public housing vehicles
using operating funds. In addition, regarding its use of capital funds, the Authority could not
show that the prices it paid for products and services totaling $171,822 were fair and reasonable,
and payments it made totaling $236,284 1 for salaries and other services were ineligible.

What We Recommend
We recommend that HUD direct the Authority to (1) provide documentation to support
$137,500 it paid for security services, or reimburse its operating fund for any costs that it cannot
support; (2) reimburse its operating fund $111,568; (3) submit a retroactive request for a waiver
to the conflict-of-interest requirements to support payments of nearly $1.5 million or reimburse
the appropriate fund 2 for any amount not covered by a waiver; (4) provide documentation to
show that purchases of products and services totaling $171,822 using capital funds were at fair
and reasonable prices; and (5) reimburse its capital fund $170,784. We also recommend that
HUD’s Departmental Enforcement Center evaluate the apparent conflict-of-interest situations
identified in this report and pursue administrative sanctions if warranted.

1
    To avoid double-counting monetary benefits, we reduced this amount by $65,500 and reported $170,784 in the
    related recommendation because $65,500 of this amount was also included in the unsupported costs reported in
    the conflict-of-interest finding and recommendation.
2
    Operating funds of $1,433,637 and capital funds of $65,500
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................5
         Finding 1: The Authority Did Not Properly Administer Its Operating Funds in
         Accordance With Requirements ...................................................................................... 5

         Finding 2: The Authority Did Not Comply With Conflict-of-Interest Requirements
         ........................................................................................................................................... 10

         Finding 3: The Authority Did Not Comply With Capital Fund Program
         Requirements................................................................................................................... 13

Scope and Methodology .........................................................................................16

Internal Controls ....................................................................................................18

Appendixes ..............................................................................................................19
              A. Schedule of Questioned Costs and Funds To Be Put to Better Use ................ 19

              B. Auditee Comments and OIG’s Evaluation ....................................................... 20

              C. Summary of Results of File Reviews ................................................................. 28

              D. Results from Review of Capital Fund Disbursements ...........................…… 29

              E. Schedule of Deficiencies and Questioned Costs................................................ 30




                                                                         2
Background and Objective
The U.S. Department of Housing and Urban Development’s (HUD) public housing program was
established to provide decent and safe rental housing for eligible low-income families, the
elderly, and persons with disabilities. Operating funds and capital funds are two major
components of HUD’s public housing program. Operating funds provide annual operating
subsidies to public housing agencies to assist in funding the operating and maintenance expenses
of low-income housing units. Capital funds provide annual formula grants to public housing
agencies for the development, financing, and modernization of public housing developments and
management improvements.

The Crisfield Housing Authority is a public housing agency located in Crisfield, MD. It is
governed by a five-member board of commissioners. The board conducts the Authority’s
business and establishes policies. The mayor of Crisfield appoints the members to the board.
The board hires an executive director to manage the day-to-day operations of the Authority. The
executive director is directly responsible for carrying out the policies established by the board
and is delegated responsibility for hiring, training, and supervising the Authority’s staff to ensure
compliance with applicable requirements. The Authority is located at 115 South Seventh Street,
Crisfield, MD. It owns and manages 330 public housing units. HUD authorized the Authority
the following assistance for its public housing program for fiscal years 2014 to 2016:

                                         Operating Fund             Capital Fund
                  Fiscal year
                                            program                  program
                      2014                 $916,123                   $390,940
                      2015                 1,035,367                   398,622
                      2016                  952,877                    417,006
                     Totals                2,904,367                  1,206,568

HUD designated the Authority “troubled” on December 28, 2015, due to its fiscal year 2015
public housing authority assessment system score. The main contributors to the low score were
scores of 4 out of 25 points in the financial assessment sub-system and 22 out of 40 points in the
physical assessment sub-system. HUD removed the “troubled” designation from the Authority
on March 31, 2017.

We received a complaint alleging that the Authority was not administering its public housing
programs in accordance with Federal requirements. The complaint made several allegations,
including misuse of public housing funds and improper use of assets to secure a loan. Because
we had not audited the Authority, we performed a comprehensive audit of its HUD-funded




                                                  3
programs. This is the second of two reports that address the Authority’s administration of HUD-
funded programs. 3

Our objective was to determine whether the Authority administered its public housing programs
in accordance with applicable HUD requirements and its annual contributions contract.




3
    Audit Report 2018-PH-1003, The Crisfield Housing Authority, Crisfield, MD, Did Not Properly Administer Its
    Housing Choice Voucher Program, issued March 30, 2018


                                                        4
Results of Audit

Finding 1: The Authority Did Not Properly Administer Its
Operating Funds in Accordance With Requirements
The Authority could not adequately support its use of public housing program operating funds
totaling $137,500. The Authority could not

    •    support payments totaling $137,500 that it paid for security services provided by its local
         law enforcement agencies,
    •    support the eligibility of 14 families participating in its public housing program,
    •    show that it properly selected families from the waiting list,
    •    show that it properly charged flat rents to families that chose the pay flat rent, and
    •    justify charging an extremely low rent amount to eight employees who lived in its public
         housing units.

These conditions occurred because the Authority lacked procedures and controls to ensure that it
administered operating funds in accordance with applicable requirements. As a result, the
Authority’s use of operating funds totaling $137,500 was unsupported.

The Authority’s Payments for Security Services Were Unsupported
The Authority made unsupported payments of operating funds for security services totaling
$137,500 during our audit period. Although HUD regulations allowed the Authority to use
operating funds to pay for these expenses, the Authority was required to maintain documentation
to support the expenses.

Payments for Services Provided by the City’s Department of Police
The Authority signed an indefinite contract with the City of Crisfield’s Department of Police that
started on July 1, 2014. 4 It agreed to reimburse the City for police services in the amount of
$10,000 quarterly. It paid the City $110,000 for these services during the audit period. All of
the payments were unsupported because contrary to article V, section C, of the contract, the City
did not provide copies of certified payroll time reports documenting names, employee
identification, the hours worked in the Authority’s public housing developments, supervisory
approval of the reports, and supervisory verification of the necessity for any overtime worked.
In addition, a $10,000 payment for services provided during the period April 1, 2014, to June 30,
2014, was unsupported because the Authority did not have a contract with the City for services
for that period.




4
    The contract did not have an end date. The terms of the contract remained in effect until either party terminated
    the contract by giving the other party 30 days’ notice.


                                                           5
Payments for Services Provided by the Somerset County Sheriff’s Office
The Authority signed a 1-year contract with the sheriff’s office that started on September 1,
2015. The Authority agreed to reimburse the sheriff’s office a total amount not to exceed
$10,000 per year ($2,500 per quarter). It signed an indefinite contract with the sheriff’s office
that started on August 15, 2016, for the same services at the same rates. The Authority paid the
sheriff’s office $27,500 for these services during the audit period. All of the payments were
unsupported because the Authority had no invoices to support the payments. The Authority
stated that it automatically paid the sheriff’s office based on the contract. Further, contrary to
article V, section C, of the contract, the sheriff’s office did not provide copies of certified payroll
time reports documenting names, employee identification, the hours worked within in the
Authority’s public housing developments, supervisory approval of the reports, and supervisory
verification of the necessity for any overtime worked. In addition, payments totaling $14,166 for
services provided during the period April 1, 2014, to August 31, 2015, were unsupported because
the Authority did not have a contract with the sheriff’s office for services during that period.

These conditions occurred because the Authority lacked controls to ensure that it (1) made
payments for these services only after it received the documentation required by the contracts
with the City and the sheriff’s office and (2) always had contracts in place for these services. As
a result, payments totaling $137,500 for these services were unsupported.

The Authority Lacked Documentation To Support Household Eligibility
The Authority’s files for 14 families reviewed lacked documentation to show that the families
were eligible for assistance under the program. HUD regulations at 24 CFR (Code of Federal
Regulations) 960.201 require that applicants meet all eligibility requirements to receive housing
assistance. The files lacked the following eligibility documentation:

   •   14 files lacked documentation to show citizenship declarations. Regulations at 24 CFR
       5.508(c)(1) required the Authority to obtain a written declaration of citizenship from each
       family member.
   •   6 files lacked copies of birth certificates for one or more household members. Chapter 7,
       paragraph 7-II.C, of the Authority’s administrative plan stated that a birth certificate or
       other official record of birth was the preferred form of age verification for all family
       members.
   •   1 file lacked evidence to show that the Authority used HUD’s Enterprise Income
       Verification system to verify household income since the family was a previous public
       housing participant. Regulations at 24 CFR 5.233(a)(2)(i) require the Authority to use
       the income verification system as a third-party source to verify tenant employment and
       income.

These conditions existed because the Authority lacked procedures to have a supervisor review
the files to ensure that staff complied with program requirements. As a result, HUD had no
assurance that families residing in public housing units were eligible for assistance and that rent
amounts were always calculated correctly. (Appendix C contains a summary of the results of our
file reviews.)




                                                   6
The Authority Did Not Maintain Documentation To Support Waiting List Selection and
Placements
For 14 of 39 files reviewed, the Authority did not maintain appropriate documentation to show
that the families were selected from the waiting list in accordance with its admission and
occupancy plan. The files lacked documentation to show each applicant’s waiting list position,
preference points, and selection from the waiting list. Program regulations at 24 CFR
960.202(c)(2) required the Authority to leave a clear trail showing that each applicant had been
selected in accordance with the method established in the Authority’s admission policies. This
condition existed because the Authority lacked controls to ensure that it complied with program
requirements. As a result, there was no assurance that applicants were placed properly on the
waiting list and selected fairly from it.

The Authority Did Not Properly Implement Flat Rents
The Authority did not charge 54 families flat rent as required. HUD’s Office of Public and
Indian Housing Notices 2014-12 and 2015-13 required the Authority to establish flat rents based
on the market rent of comparable units in the private, unassisted rental market. At admittance
into the program and at annual recertification, assisted families choose to either pay an income-
based rent or a flat rent. Generally, HUD required flat rents to be set at rates no lower than 80
percent of the fair market rent for the area based on the number of bedrooms in the housing
unit. The Authority did not use the fair market rents to calculate the rent for the 54 families that
chose to be charged a flat rent. For example, for one family residing in an efficiency unit, the
Authority set the rent amount at $312 although the rent amount should have been $392 based on
the fair market rent values and HUD’s flat rent guidance. As a result, the Authority did not
collect the appropriate amount of rent from these families. This condition occurred because the
Authority assigned the responsibility for implementing the flat rent requirements to an employee
who was not familiar with the public housing program and the Authority lacked procedures to
have a supervisor review the files to ensure that staff complied with flat rent requirements. As a
result, the Authority undercharged families rent by $83,674 during our audit period, and we
estimate that it will undercharge these families $38,664 in rent over the next year if it does not
correct the flat rent amounts it charges. 5

The Authority Could Not Justify Employee Rent Amounts
The Authority could not justify charging rent of $275 per month to eight employees regardless of
the number of bedrooms in their housing units. Three of the eight families resided in units that
were larger than their need based on family size. HUD Handbook 7465.1, REV-2, chapter 6,
section 3(b)(2) states that public housing tenants who work for the public housing agency are
subject to all of the occupancy requirements and have all the same rights and responsibilities as
other public housing tenants. The handbook also states that the public housing agency may not
lower the amount it is required to pay as rent as compensation for employment. Chapter 5,


5
    We used in our calculations the small area fair market rents for zip code 21817 which is where the Authority and
    its public housing units are located. Small area fair market rents reflect rents for U.S. Postal ZIP codes, while
    traditional fair market rents reflect a single rent standard for an entire metropolitan region. We estimated that the
    Authority would continue to collect less rent over the next year. As of December 31, 2016 (the end of our audit
    period), we determined that 54 families were underpaying $3,222 per month ($3,222 x 12 = $38,664).


                                                            7
section 5.1.b, of the Authority’s admission and continued occupancy plan required it to establish
occupancy standards to ensure that units were occupied by families of the appropriate size and
apply them in a manner consistent with fair housing requirements. Contrary to requirements, the
occupancy specialist recertified the rent for these employees at the same extremely low rate
annually. The executive director explained that the practice of charging employees an extremely
low rent was in effect when he was hired by the Authority in 2002. The executive director
viewed this arrangement as an employee benefit and believed that HUD was aware of it. As a
result, the Authority collected $41,809 less in rent from these eight families during our audit
period. Unless the Authority corrects this condition, we estimate that it will collect $25,248 less
in rent over the next year from these eight families. 6
Conclusion
The Authority could not adequately support its use of public housing program operating funds.
The Authority lacked procedures and controls to ensure that it complied with applicable
requirements. As a result, its use of operating funds totaling $137,500 was unsupported.

Recommendations
We recommend that the Director of HUD’s Baltimore Office of Public Housing direct the
Authority to

         1A.      Provide documentation to support the $137,500 paid for security services from
                  operating funds or reimburse its program from non-Federal funds for any costs
                  that it cannot support.

         1B.      Provide the documentation that was missing from the 14 files reviewed. If
                  documentation cannot be provided, the Authority should follow applicable
                  regulations and terminate or modify assistance as necessary.

         1C.      Develop and implement controls to ensure that families are properly selected from
                  the waiting list and that their selection is documented in their tenant files.

         1D.      Correct the rent calculations for the 54 families identified by the audit to properly
                  implement flat rent.

         1E.      Correct the rent calculations for the employees whom it charged an extremely low
                  rent, thereby ensuring that it collects an estimated $25,248 more in rent over the
                  next year.

         1F.      Develop and implement controls to ensure that it pays for services only after it
                  receives the documentation required to be provided by contract and that provided
                  services are supported by a contract.



6
    As of December 31, 2016 (the end of our audit period), the eight families underpaid rent by $2,104 per month
    ($2,104 x 12 months = $25,248).


                                                          8
       1G.    Develop and implement procedures to have a supervisor review tenant files to
              ensure that the files are accurate and complete and comply with program
              requirements.

       1H.    Develop and implement procedures to ensure that flat rents are calculated
              correctly for those families that choose to pay flat rent, thereby ensuring that it
              collects at least $38,664 in additional rental income.

We also recommend that the Director of HUD’s Baltimore Office of Public Housing

       1I.    Provide training and technical assistance to the Authority to ensure that it properly
              administers its operating funds in accordance with applicable requirements.




                                                 9
Finding 2: The Authority Did Not Comply With Conflict-of-Interest
Requirements
Contrary to the terms of its consolidated annual contributions contract, the Authority allowed
conflict-of-interest situations to exist when it paid the husband of its Housing Choice Voucher
Program coordinator, the brother of the executive director, and the chairman of its board of
commissioners to participate in its public housing program. The Authority paid businesses
owned by the three individuals more than $1.6 million in program funds for unit repairs and
repairs to its public housing vehicles. 7 These conditions occurred because the Authority lacked
controls to prevent and detect conflict-of-interest situations and it did not request waivers from
HUD. As a result, it improperly paid program funds totaling more than $1.6 million to
individuals who were prohibited by the annual contributions contract from participating in the
program.

The Authority Allowed Conflict-of-Interest Situations To Exist
Contrary to the terms of its consolidated annual contributions contract, the Authority allowed
three ineligible individuals to participate in its program. The following paragraphs provide
details.

    •    The husband of the Authority’s Housing Choice Voucher Program coordinator
         participated in the program, although it was prohibited. During the period April 2010 to
         June 2014,8 the Authority paid $827,649 to a business owned by the husband for
         renovation services, such as drywall replacement, cabinet repair, and other repairs needed
         in its public housing units. Section 19(A)(1)(ii) of the Authority’s consolidated annual
         contributions contract prohibited the Authority from entering into any contract or
         arrangement in connection with a project under the contract in which any employee of the
         Authority who formulated policy or who influenced decisions with respect to the project
         or any members of the employee’s immediate family or the employee’s partner had an
         interest, direct or indirect, during his or her tenure or for 1 year thereafter.

    •    The brother of the Authority’s executive director participated in the program although it
         was prohibited. The Authority paid $778,483 during the period December 2010 to June
         2015 8 to a business owned by the brother for repairs to housing units. Section
         19(A)(1)(ii) of the Authority’s consolidated annual contributions contract prohibited this
         arrangement.

    •    The chairman of the Authority’s board of commissioners participated in the program
         although it was prohibited. During the period January 2013 through March 2016,8 the
         Authority paid $4,573 9 to an automotive repair shop owned by the board chairman for


7
    Of this amount, $1,545,205 was operating funds, and the other $65,500 was capital funds.
8
    The Scope and Methodology section of this report explains why payments outside our audit period were
    reported.
9
    Of this amount, $3,381 was paid during our audit period, and the remaining $1,192 was paid before our audit
    period.


                                                         10
          repairs to the Authority’s vehicles. Section 19(A)(1) of the Authority’s consolidated
          annual contributions contract prohibited it from entering into a contract or arrangement in
          connection with the program in which any present or former member or officer of the
          Authority has an interest, direct or indirect, during his or her tenure or for 1 year
          thereafter.

These conditions occurred because the Authority lacked controls to prevent and detect conflict-
of-interest situations and it did not request waivers from HUD. Although section 19 of the
consolidated annual contributions contract permitted HUD to waive conflict-of-interest
requirements for good cause, the Authority did not request waivers. It incorrectly believed that
these situations were allowed as long as it disclosed them in its annual audited financial
statements and its board approved of the arrangement. As a result, the payments totaling more
than $1.6 million were ineligible. However, for nearly $1.5 million of the $1.6 million the
Authority paid to the brother of the executive director and the husband of its Housing Choice
Voucher program coordinator, HUD stated that it verbally waived the conflict-of-interest
requirements for work performed on its public housing units to recover from Hurricane Sandy.
The following chart shows the payments made before and after Hurricane Sandy affected
Crisfield, MD. 10

                                               Payments before           Payments after
                     Payee                                                                         Totals
                                               Hurricane Sandy          Hurricane Sandy
      Husband of the Housing Choice
                                                       $192                 $827,457 11          $827,649
       Voucher Program coordinator
      Brother of the executive director              106,803                 671,680 12           778,483
                     Totals                          106,995                1,499,137 13         1,606,132

Paragraph 14.4D of HUD Handbook 7460.8, REV 2, required the Authority to submit requests
for waivers to the HUD field office for approval by HUD headquarters if the HUD field office
recommended approval. It stated that HUD headquarters would determine whether good cause
existed for approving a waiver under the consolidated annual contributions contract. Since the
HUD field office stated that it verbally expressed approval for the Authority to conduct business
with otherwise prohibited parties, we considered the related payments totaling nearly $1.5
million unsupported because these payments required a decision by HUD headquarters’ officials.

HUD’s Review Identified This Issue
HUD conducted an on-site public housing authority recovery and sustainability initiative
assessment of the Authority in May 2016 and identified this issue. HUD found that to expedite


10
     On October 28, 2012, Hurricane Sandy moved up the eastern seaboard of the United States, making landfall near
     Atlantic City, NJ, on October 29, 2012.
11
     Of this amount, $794,957 was operating funds, and the other $32,500 was capital funds.
12
     Of this amount, $638,680 was operating funds, and the other $33,000 was capital funds.
13
     Of this amount, $2,650 was paid with operating funds during our audit period, and the remaining $1.4 million
     was paid before our audit period.


                                                         11
the construction and renovations required to rehouse displaced tenants after Hurricane Sandy, the
Authority contracted with businesses that had family connections to Authority staff that would
be classified as conflicts of interest. The husband of an Authority employee owned one of the
businesses and the brother of the executive director owned the other business. HUD stated that
the Authority contracted with these businesses despite the conflict of interest. HUD also found
that the Authority contracted with an automotive repair business owned by a member of the
board of commissioners. It stated that there was no supporting documentation that indicated
HUD issued a waiver that would exempt the conflict of interest. HUD recommended that (1)
conflicts of interest should be avoided whenever possible; and (2) when a conflict arises and
cannot be circumvented, the Authority should follow its procurement policy for detailed
instructions on how to process and seek a waiver from HUD to proceed. However, the
negotiated recovery agreement did not address these recommendations in the action plan.

Conclusion
The Authority allowed three ineligible individuals to participate in its program. These conditions
occurred because the Authority lacked controls to prevent and detect conflict-of-interest
situations and it did not request waivers from HUD to resolve the conflicts. HUD stated that it
verbally waived the conflict-of-interest requirements for work performed on the Authority’s
public housing units to recover from Hurricane Sandy. Therefore, as a result, the Authority
made ineligible payments totaling $111,568 14 and unsupported payments totaling nearly $1.5
million.
Recommendations
We recommend that the Director of HUD’s Baltimore Office of Public Housing require the
Authority to

          2A.      Reimburse its program $111,568 from non-Federal funds for the ineligible
                   payments it made due to the conflict-of-interest situations identified by the audit.

          2B.      Submit a retroactive request for a waiver to the conflict-of-interest requirements
                   to support payments totaling $1,499,137 15 or reimburse the appropriate fund from
                   non-Federal funds for any amount not covered by a waiver.

          2C.      Develop and implement controls to prevent and detect conflict-of-interest
                   situations.

We also recommend that the Director of HUD’s Departmental Enforcement Center

          2D.      Evaluate the apparent conflict-of-interest situations in this report and pursue
                   administrative sanctions if warranted.




14
     $111,568 = $4,573 + $192 + $106,803
15
     Of this amount, $1,433,637 was operating funds and the other $65,500 was capital funds.


                                                          12
Finding 3: The Authority Did Not Comply With Capital Fund
Program Requirements
Contrary to HUD regulations and program requirements, the Authority improperly procured
products and services and used capital funds for ineligible purposes. Specifically, it (1) did not
always maintain documentation to show that it procured products and services according to
procurement requirements; and (2) used capital funds to pay for employee salaries, concrete and
unit repairs, and security services that did not meet program eligibility requirements. These
conditions occurred because the Authority lacked controls to ensure that it complied with
applicable requirements. As a result, it could not show that the prices it paid for products and
services totaling $171,822 were fair and reasonable, and its payments totaling $236,284 for
salaries and other services were ineligible.

The Authority Did Not Adequately Document Procurement of Products and Services
Of more than $1 million in program funds that the Authority disbursed to 25 vendors during the
audit period, it did not have documentation to support its procurement of products and services
totaling $171,822 from 11 vendors. The Authority purchased products and services from

   •   11 vendors without having prepared independent cost estimates. The Authority’s
       procurement policy stated that for all purchases above the micropurchase threshold
       (purchases less than $2,000), it was required to prepare an independent cost estimate
       before solicitation. The policy also stated that the level of detail was required to match
       the cost and complexity of the item to be purchased. The Authority could not provide
       documentation to show that it complied with the above requirements. As a result,
       purchases totaling $171,822 were unsupported.
   •   5 vendors without documentation to show that it competitively procured products and
       services. Section 1.3 of HUD Handbook 7460.8, REV-2, reminded the Authority that
       among other items, the Federal uniform administrative requirements required it to ensure
       an environment of full and open competition in all procurement matters. To meet this
       requirement, the Authority’s procurement policy stated that for any purchases below the
       small purchase limit of $100,000, it was required to obtain a reasonable number of
       quotes, preferably three, and for purchases less than $2,000 only one quote was required
       if that quote was considered reasonable. It also stated that the Authority would award the
       purchase to the qualified vendor that provided the best value and if it awarded the
       purchase for reasons other than lowest price, documentation had to be maintained in the
       contract file. Since the Authority did not have documentation to show that it purchased
       services and products competitively, purchases totaling $84,467 were unsupported.
   •   1 vendor without creating contracts as required by paragraph 5.10(B) of HUD Handbook
       7460.8, REV 2. The Handbook stated that contracts for construction work costing more
       than $2,000 but not more than $100,000 were required to incorporate the clauses for
       general conditions for small construction and development contracts, and the applicable
       Davis-Bacon Act wage decision. To incorporate the required clauses, there needed to be
       a contract. Since the Authority paid for these services without having contracts in place,
       purchases totaling $38,958 were unsupported.



                                                 13
   •   1 vendor after the contract expired. The contract for security services expired in July
       2007 and was not renewed until July 1, 2014. The Authority continued to pay the vendor
       without a contract in place including $9,682 for services during the period April 1,
       through June 30, 2014, which was in our audit period. The Authority’s procurement
       policy required it to maintain a system of contract administration to ensure that
       contractors performed in accordance with their contracts. Without a contract, the terms
       of the relationship, as well as the rights and responsibilites of the Authority and the
       vendor, were unknown. Since the Authority paid for these services without having a
       contract in place, purchases totaling $9,682 were unsupported.

Since the Authority did not have documentation to show that it complied with requirements,
payments totaling $171,822 were unsupported. (Appendix D contains the results from our
review of capital fund disbursements. Some disbursements had more than one deficiency.
Appendix E shows the deficiencies and questioned costs.)

The Authority Used Capital Funds To Pay for Ineligible Costs
The Authority improperly used capital funds totaling $236,284 to pay for ineligible employee
salaries, concrete and unit repairs, and security services. It used funds totaling $161,102 to pay
salary costs for three employees who performed duties associated with public housing rent
collection, day care, and youth programs. Regulations at 24 CFR 905.200(b)(15) state that any
administrative costs, including salaries and employee benefit contributions, must be related to a
specific public housing development or modernization project. The work performed by the three
employees noted above was related to the administration of public housing. It was not work
related to developing or modernizing a public housing project. The Authority also used funds
totaling $65,500 to pay two businesses owned by individuals who were prohibited from
participating in the program due to apparent conflict-of-interest situations (see finding 2).
Further, the Authority also used capital funds totaling $9,682 to pay for security services.
Regulations at 24 CFR 905.202(h)(1) state that costs for security guards or ongoing security
services are ineligible. The Authority agreed that it spent capital funds on services that did not
meet program eligibility requirements. It explained that since the items were listed in its annual
plan which was reviewed by HUD, HUD approved it to spend funds on the identified services.
Since the Authority made payments for prohibited expenses that were not program related, the
payments totaling $236,284 were ineligible. (Appendix E shows the deficiencies and questioned
costs.)

HUD’s Review Identified Problems
In its May 2016 public housing authority recovery and sustainability initiative assessment HUD
found that the Authority incurred ineligible expenses for security services and salaries for its day
care and youth sports staff. HUD recommended that (1) the executive staff should participate in
training directed toward the capital fund and request technical assistance from the Baltimore
HUD Field Office; (2) the Authority should request a budget revision to eliminate the ineligible
capital fund expenses including costs for security services and salaries for day care and youth
sports staff; and (3) the executive staff participate in procurement training to reacquaint
themselves with the procurement policy. The negotiated recovery agreement addressed the
recommendation for the Authority to eliminate ineligible expenses in the action plan. The action


                                                  14
plan required the Authority to correct its 2016 capital fund plan and not include ineligible
expenses on its 2017 capital fund plan. The action plan did not include the Authority repaying
its program for the ineligible expenses that HUD identified during its review.

Conclusion
Contrary to HUD regulations and program requirements, the Authority improperly procured
products and services and used capital funds for ineligible purposes. These conditions occurred
because that Authority lacked controls to ensure that it complied with applicable requirements.
As a result, the Authority could not show that the prices it paid for products and services totaling
$171,822 were fair and reasonable and its payments totaling $236,284 for salaries and other
services were ineligible.

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

          3A. Provide documentation to show that products and services totaling $171,822 were
              purchased at fair and reasonable prices. For any amounts determined to be
              unreasonable and not supported, the Authority should reimburse the program from
              non-Federal funds.

          3B. Reimburse its program $170,784 16 from non-Federal funds for the ineligible salary
              payments and ongoing security payments.

          3C. Develop and implement controls over its procurement actions to ensure that prices
              paid for goods and services are reasonable.

          3D. Develop and implement controls to ensure that program funds are used for eligible
              activities only.




16
     To avoid double-counting, we reduced the ineligible amount reported in this recommendations by $65,500 paid
     to two vendors because that amount was included in the unsupported costs reported in recommendation 2B. The
     calculation is $236,284 - $33,000 - $32,500 = $170,784.




                                                        15
Scope and Methodology
We conducted the audit from January 2017 through July 2018 at the Authority’s office located at
115 South Seventh Street, Crisfield, MD, and our offices located in Richmond, VA, and
Baltimore, MD. The audit covered the period April 2014 through December 2016 but was
expanded to include the period April 2010 to April 2014 to review payments the Authority made
to individuals who were prohibited from participating in its public housing program because of
apparent conflict-of-interest situations. We included these payments to determine whether the
conflict-of-interest situations existed before the Hurricane Sandy disaster in October 2012.

To accomplish our objective, we reviewed

   •   Applicable regulations; the Authority’s administrative plan; HUD’s program
       requirements at 24 CFR Parts 990, 960, and 905; Office of Public and Indian Housing
       notices; HUD’s Financial Management 7475.1 Guidebook; and HUD’s Public Housing
       Occupancy Guidebook.
   •   The Authority’s program files, including household files; family data; financial records;
       procurement files; annual audited financial statements for its fiscal years ending
       March 31, 2014, 2015, and 2016; policies and procedures; board meeting minutes; and
       organizational chart.
   •   HUD’s report from its May 2016 public housing authority recovery and sustainability
       initiative on-site assessment.

We also interviewed the Authority’s employees and HUD staff.

To achieve our objective, we relied in part on computer-processed data such as family data,
disbursement and receipts registers and other data from the Authority’s computer system. We
also accessed HUD’s Public and Indian Housing Information Center system and obtained other
family information reported by the Authority such as flat rent amounts. 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.

During the audit period, the Authority received more than $2.6 million in operating funds and
more than $1 million in capital funds. For the operating funds, we reviewed the Authority’s
bank statements and cash receipts journal to determine the amount of operating funds received.
We reviewed all receipts to determine whether the Authority allocated the operating funds in
accordance with asset management requirements.

To determine whether the Authority ensured that eligibility requirements were met and whether
the Authority properly selected families from its waiting list, we accessed HUD’s Public and
Indian Housing Information Center system and determined that 43 families were admitted into
the program during our audit period. Based on data in the system, we selected 7 of the 43
families for review because they were either potentially overhoused, over-income or reported


                                                16
zero income. We selected the remaining seven families randomly based on the date of their
admission into the program, from the oldest to the most recent date. We reviewed the tenant
files of the families, which included income, eligibility, and other documentation needed for
program participation. Since we did not use a statistical sample, our results applied only to the
files reviewed. Therefore, we did not project our results to the universe.
We reviewed the Authority’s audited financial statements for its fiscal years ending March 31,
2014, 2015, and 2016. In the notes to the financial statements, the Authority disclosed related-
party transactions with an automotive repair business managed and owned by the chairman of the
Authority’s board of commissioners, a construction business managed and owned by the brother
of the Authority’s executive director, and a construction business managed and owned by the
husband of an Authority employee. During those 3 years, the Authority paid $4,573 to the
automotive repair business owned by the chairman of the Authority’s board of commissioners,
$369,680 to the construction business managed and owned by the brother of the Authority’s
executive director, and $463,955 to the construction business managed and owned by the
husband of an Authority employee. The executive director stated that the work performed by his
brother and the husband of an Authority employee was to repair damage to units that was caused
by Hurricane Sandy. The executive director provided us a list of payments the Authority made
to the two businesses owned by these two individuals for the period April 2010 to June 2015. To
determine whether the funds to pay for Sandy-related damage were operating funds, we obtained
the asset management project ledgers for 2012-2014 and determined that the Authority made
payments from operating funds. Additionally, for the repairs to the Authority’s vehicles, we
were able to trace the individual’s payments to the asset management projects’ operating fund
ledgers.

For the review of capital funds, the Authority did not maintain a contract register so we reviewed
the capital funds disbursement ledger, which showed that the Authority had disbursed funds
totaling more than $1 million to 25 vendors. (See appendix D.)

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.




                                                 17
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:

•   Program operations – Policies and procedures that management has implemented to
    reasonably ensure that a program meets its objectives.
•   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.
•   Compliance with applicable laws and regulations – Policies and procedures that management
    has implemented to reasonably ensure that resources use is consistent with laws and
    regulations.
We assessed the relevant controls identified above.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, the
reasonable opportunity to prevent, detect, or correct (1) impairments to effectiveness or
efficiency of operations, (2) misstatements in financial or performance information, or (3)
violations of laws and regulations on a timely basis.
Significant Deficiencies
Based on our review, we believe that the following items are significant deficiencies:

•   The Authority lacked procedures, and controls to ensure that it administered operating and
    capital funds in accordance with applicable program requirements (findings 1 and 3).

•   The Authority lacked controls to prevent and detect conflict-of-interest situations (finding 2).




                                                  18
Appendixes

Appendix A
          Schedule of Questioned Costs and Funds To Be Put to Better Use
        Recommendation                                    Funds to be put
                           Ineligible 1/ Unsupported 2/
            number                                         to better use 3/
                1A                                  $137,500
                1E                                                       $25,248
                1H                                                        38,664
                2A              $111,568
                2B                                  1,499,137
                3A                                  171,822
                3B               170,784

              Totals             282,352            1,808,459             63,912


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 Office of Inspector General (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. In these cases, the funds to be put to better use represent
     additional rent the Authority will collect over the next year because it will correctly
     calculate rent amounts for its assisted employees and families that choose to pay flat rent.




                                               19
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




                               20
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation



Comment 1

Comment 2
Comment 3
Comment 4
Comment 5



Comment 6
Comment 7

Comment 8

Comment 9




                               21
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation



Comment 10
Comment 11
Comments
11 and 12




                               22
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation


Comment 13
Comment 14



Comment 15




Comment 16
Comment 17




Comment 18




                               23
                         OIG Evaluation of Auditee Comments


Comment 1   Based on the additional documentation that the Authority provided with its
            written comments, we have removed from the report the finding and
            recommendation related to the Authority’s central office cost center (COCC).

Comment 2   The Authority stated that it provided documentation to show that payments for
            security services totaling $137,500 were approved by HUD. We disagree. The
            Authority has not provided documentation to show that HUD approved these
            services. Moreover, as stated in the audit report, the payments for security
            services were unsupported because the Authority lacked copies of certified
            payroll time reports and executed contracts. As part of the audit resolution
            process, the Authority will have the opportunity to provide documentation to
            HUD to support the payments and HUD will evaluate it to determine whether it
            satisfies the recommendation.

Comment 3   The Authority stated that it is currently working to replace the missing
            documents. However, the Authority’s response did not address the second part of
            the recommendation that directed it to follow applicable regulations and terminate
            or modify assistance as necessary, if it cannot provide adequate documentation.
            As part of the audit resolution process, the Authority will have the opportunity to
            provide documentation to HUD and HUD will determine whether it satisfies the
            recommendation.

Comment 4   The Authority stated that it will make sure that documentation is in the files.
            However, the Authority’s response did not address the actions of developing and
            implementing controls to ensure that families are properly selected from the
            waiting list and that their selection is documented in their files. As part of the
            audit resolution process, the Authority will have the opportunity to provide
            documentation to HUD and HUD will determine whether it satisfies the
            recommendation.

Comment 5   The Authority stated that it had already implemented flat rents for 2018. It also
            stated that in previous years, the implementation of the flat rents resulted in some
            increases of 40 percent, that HUD directed those rents to be phased-in, and that is
            what it was trying to do. We did not see phasing-in of rents as an issue for the 54
            families we reviewed. As stated in the report, the Authority did not use the fair
            market rents to calculate the rent for the 54 families that chose to be charged a flat
            rent during our audit period. The Authority needs to correct the rent calculations
            for the 54 families that are paying inaccurate flat rents. As part of the audit
            resolution process, the Authority will have the opportunity to work with HUD to
            correct the flat rent amounts for the 54 families and HUD will ensure that the
            Authority’s corrective actions satisfy the intent of the recommendation.




                                               24
Comment 6     The Authority stated that it was working with HUD and had requested a waiver
              regarding its employees that paid extremely low rent amounts. The Authority’s
              action is noted. As part of the audit resolution process, HUD will evaluate the
              Authority’s actions and determine whether they satisfy the recommendation.

Comment 7     The Authority stated that it will request invoices before paying amounts stated in
              contracts. However, the Authority’s response did not address the actions of
              developing and implementing controls to ensure that it pays for services only after
              it receives the documentation required to be provided by contract and that
              provided services are supported by a contract. As part of the audit resolution
              process, the Authority will have the opportunity to provide documentation to
              HUD and HUD will determine whether it satisfies the recommendation.

Comment 8     The Authority stated it had developed and implemented procedures to have a
              supervisor review tenant files to ensure that the files were accurate, complete, and
              complied with program requirements. We did not review files for families that
              the Authority admitted into its program prior to Hurricane Sandy. Therefore, we
              cannot comment on whether the Authority had developed and implemented
              procedures. We reviewed files for families that the Authority admitted into its
              program after Hurricane Sandy occurred and found that the Authority lacked
              procedures for supervisors to review tenant files. As part of the audit resolution
              process, the Authority will have the opportunity to provide documentation to
              HUD and HUD will determine whether it satisfies the recommendation.

Comment 9     The Authority stated that it already had flat rents in place for 2018. The
              Authority’s statement is noted. However, the Authority’s response did not
              address the actions of developing and implementing procedures to ensure that flat
              rents are calculated correctly for those families that choose to pay flat rent. As
              part of the audit resolution process, the Authority will have the opportunity to
              provide documentation to HUD and HUD will determine whether it satisfies the
              recommendation.

Comment 10 The Authority stated that it will discuss with HUD the reimbursement of
           ineligible payments totaling $111,568 that it made due to the conflict-of-interest
           situations identified by the audit. The audit determined that the payments totaling
           $111,568 were ineligible and we recommended that HUD require the Authority to
           reimburse its program. As part of the audit resolution process, HUD and OIG will
           agree on the corrective action to be taken to satisfy the recommendation.

Comment 11 The Authority stated that it will have a discussion with HUD regarding a waiver
           to the conflict-of-interest requirements to support payments totaling nearly $1.5
           million or reimburse the appropriate fund from non-Federal funds for any amount
           not covered by a waiver. As part of the audit resolution process, HUD and OIG
           will agree on the corrective action to be taken to satisfy the recommendation.




                                                25
Comment 12 The Authority stated that it disclosed to HUD and its auditors that it was planning
           to hire the Housing Choice Voucher Program coordinator’s husband and the
           executive director’s brother to perform repair work on its public housing units
           damaged by Hurricane Sandy. It also stated that its board passed a resolution
           approving of this arrangement as it was instructed to do. The Authority cited
           Public and Indian Housing Notice 2012-2, which allowed it to use HUD funds in
           an emergency including damage resulting from a natural occurrence such as
           windstorm or flood. It also stated that it received funds from the Federal
           Emergency Management Agency and flood insurance and it deposited those funds
           into its general fund as reimbursement.

              The Authority’s actions to disclose the situation and have its board pass a
              resolution were prudent. We agree that the Authority could use HUD funds to
              pay for repair work on its public housing units damaged by Hurricane Sandy.
              However, the point of the finding is that the Authority’s consolidated annual
              contributions contact prohibited it from entering into contracts with certain
              persons that would create conflict-of-interest situations. The contract allowed
              HUD to waive the conflict-of-interest requirements for good cause; however, the
              Authority did not request waivers. We recommended that the Authority submit a
              retroactive waiver request to HUD to support the payments it made to the
              Housing Choice Voucher Program coordinator’s husband and the executive
              director’s brother to perform repair work on its public housing units damaged by
              Hurricane Sandy. As part of the audit resolution process, HUD will determine
              whether the Authority’s corrective actions are appropriate and satisfy the intent of
              the recommendation.

Comment 13 The Authority stated that it provided to us a contract for the purchase of propane
           that it solicited for bids. As shown in the audit report, the Authority did not
           provide to us a contract, documentation to show that it made the purchase
           competitively, and documentation such as cost estimates to show that the prices
           paid were fair and reasonable. As part of the audit resolution process, the
           Authority can provide documentation to HUD to support the costs. HUD will
           review the documentation provided by the Authority, determine whether it
           satisfies the recommendation, and provide its determination and the
           documentation to OIG for review and concurrence.

Comment 14 The Authority stated that documentation provided by a third party showed that it
           followed its procurement policies for equipment and repairs. The Authority
           provided a project worksheet from a third party (the Federal Emergency
           Management Agency) that addressed a vendor that assisted with renovations that
           were not part of our review. We did not identify procurement deficiencies related
           to the other vendor addressed in the third party documentation.

Comment 15 The Authority stated that it provided to us a copy of the contract for pest control
           services (line 15 of Appendix D in the report) and a copy of a contract from 2000


                                                26
              for the purchase and installation of smoke detectors (line 17 of Appendix D in the
              report). It asserted that it can purchase the smoke detectors from only the vendor
              that it paid. The Authority provided to us contracts for the purchases of pest
              control services and purchase and installation of smoke detectors. However, the
              Authority did not provide documentation to show that it purchased the pest
              control services competitively and to justify its purchase of the smoke detectors
              from a sole source. In addition, for the purchases of the pest control services and
              the smoke detectors, the Authority did not provide documentation such as cost
              estimates to show that the prices paid were fair and reasonable. As part of the
              audit resolution, the Authority will have the opportunity to provide documentation
              to HUD and HUD will determine whether the Authority’s corrective actions are
              sufficient to satisfy the intent of the recommendation.

Comment 16 The Authority stated it provided to us proof that the salaries and security services
           were approved by HUD. However, as noted in the audit report, HUD determined
           that the Authority incurred ineligible expenses for the salaries of its day care and
           youth sports staff and for security services in its May 2016 public housing
           authority recovery and sustainability initiative assessment. Although HUD
           recommended that the Authority request a budget revision, it did not require the
           Authority to repay its program for the ineligible expenses identified. Because the
           Authority’s use of capital funds for salaries of its day care and youth sports staff
           and for security services was ineligible, it needs to reimburse its program from
           non-Federal funds. As part of the audit resolution process, HUD and OIG will
           agree on the corrective action to be taken to satisfy the recommendation.

Comment 17 The Authority stated that during the declared emergency it did not have time to
           perform cost analyses to ensure prices paid for goods and services were
           reasonable. Although we understand the limitation the Authority experienced as a
           result of the disaster, the Authority paid for the purchases in question during the
           period April 2014 to December 2016. Hurricane Sandy struck Crisfield on
           October 28, 2012. The Authority needs to develop and implement controls over
           its procurement actions to ensure that prices it pays for goods and services are
           reasonable. As part of the audit resolution process, HUD will determine whether
           the Authority’s corrective actions are sufficient to satisfy the intent of the
           recommendation.

Comment 18 The Authority agreed that the salaries of its day care and youth sports staff and
           security services were ineligible capital fund activities. It was not aware that
           ineligible expenses needed to be repaid. The Authority’s response did not address
           the recommendation that directed it to develop and implement controls to ensure
           that program funds are used for only eligible activities. As part of the audit
           resolution process, the Authority will have the opportunity to provide
           documentation to HUD and HUD will determine whether it satisfies the
           recommendation.




                                               27
Appendix C
                      Summary of Results of File Reviews
                      Lacked                       Lacked evidence of use
                                  Lacked birth
      Tenant file   citizenship                     of Enterprise Income
                                   certificates
                    declaration                      Verification system
           1             X              X                     X
           2             X
           3             X
           4             X              X
           5             X              X
           6             X
           7             X              X
           8             X              X
           9             X              X
          10             X
          11             X
          12             X
          13             X
          14             X
        Totals          14               6                   1




                                      28
Appendix D
               Results From Review of Capital Fund Disbursements
                                         Amount        Unsupported Ineligible
  #    Reason for disbursement
                                        disbursed        amount     amount

  1          Loan repayment             $221,660
  2       General fund transfers         197,912
       Purchase and installation of
  3                                      108,243
               transformers
   4         Section 8 salary               63,818                   $63,818
   5         Day care salary                50,927                    50,927
   6        Youth club salary               46,357                    46,357
   7         Propane service                38,958        $38,958
   8         Concrete repair                33,000                   33,000
   9            Unit repair                 32,500                   32,500
  10   Purchase of lawn equipment           26,642        26,642
  11     Purchases of appliances            24,033        24,033
  12      Modernization salary              22,268
  13         Loan repayment                 20,715
  14          Furnace repair                20,000
  15            Pest control                15,800        15,800
  16     Purchases of appliances            15,796        15,796
       Purchase and installation of
  17                                        12,909        12,909
             smoke detectors
  18     Purchase of generators             11,890        11,890
  19          Audit services                11,500        11,500
  20        Security services                9,682                    9,682
  21     Purchase of equipment               6,875         6,875
  22       Furnace installation              5,300         5,300
  23   Purchase of furnace supplies          2,119         2,119
  24   Purchase of lawn equipment            1,600
  25       Purchase of supplies              1,592
               Totals                   1,002,096         171,822    236,284




                                       29
Appendix E
                             Schedule of Deficiencies and Questioned Costs

                                                       Violations        Unsupported           Ineligible
       #       Reason for disbursement
                                                        noted*             amount               amount

                                                    1 2 3 4 5
       1            Section 8 salary                        X                                   $63,818
       2            Day care salary                         X                                    50,927
       3           Youth club salary                        X                                    46,357
       4            Propane service                 X X X                   $38,958
       5            Concrete repair                         X                                   33,000 17
       6              Unit repair                           X                                   32,50017
       7      Purchase of lawn equipment            X                        26,642
       8        Purchases of appliances             X                        24,033
       9              Pest control                  X X                      15,800
      10        Purchases of appliances             X                        15,796
              Purchase and installation of          X X
      11                                                                     12,909
                   smoke detectors
      12        Purchase of generators              X                        11,890
      13             Audit services                 X X                      11,500
      14           Security services                            X X                              9,682
      15        Purchase of equipment               X                         6,875
      16         Furnace installations              X X                       5,300
      17      Purchase of furnace supplies          X                         2,119
                        Totals                      11 5 1 1 6              171,822            236,28417

* Violations noted during review
    1. No cost estimates
    2. No competition
    3. No contracts
    4. Contract expired
    5. Payment prohibited




17
     To avoid double-counting questioned costs, we did not include these costs in recommendation 3B because they
     were included in recommendation 2B ($236,284 - $33,000 - $32,500 = $170,784). Payment was prohibited due
     to the apparent conflict of interest.


                                                         30