Audit Related Memorandum
No. 96-AT-201-1802
October 18, 1995
MEMORANDUM FOR: Paul K. Turner, Director - Office of Public Housing,
Jacksonville, Florida
FROM: Kathryn Kuhl-Inclan, District Inspector General for Audit, Southeast/Caribbean
SUBJECT: Administrative Deficiencies
Operation Safe Home Probe
Hialeah Housing Authority
Hialeah, Florida
In conjunction with Operation Safe Home, we have completed a limited
review of selected operations of the Housing Authority of the City of
Hialeah, Florida (HHA). The review was designed primarily to identify
acts of fraud or other criminal wrongdoing, or serious program abuse. We
reviewed HHA's records and interviewed HHA and HUD staff. We selected
areas to review based on information obtained in the interviews and on
cursory reviews of records. We performed the review during February
through June 1995.
While conducting the review, we noted indications of administrative
deficiencies that appear to warrant additional attention by both HUD and
HHA staff. We did not develop the deficiencies as we normally would to
meet reporting standards for generally accepted government auditing
standards.
SUMMARY
The executive director (ED) charged the authority $62,882 for ineligible
health and insurance premiums for his divorced spouse, ineligible and
unsupported travel costs, and excessive compensatory time. Furthermore,
the ED did not follow required payment and procurement policies, violated
the conflict of interest provisions for Section 8 contracts with the
mayor and a business partner, improperly withdrew $200,000 from the
Section 8 reserve account, did not properly control staff resources, and
did not ensure compliance with Section 8 tenant preferences, salary
comparability and cost allocation requirements, and pooling of funds
requirements.
As a minimum, we recommend you require the executive director to
reimburse the HHA, and implement better control procedures. Considering
the seriousness of the deficiencies and deviations of established control
procedures, we also recommend you consider issuing an Limited Denial of
Participation (LDP) against the ED. Details of our findings and
recommendations are discussed in Attachment 1.
Within 60 days, please give us, for each recommendation in the
memorandum, a status report on: (1) the corrective actions taken; (2) the
proposed corrective actions and the date to be completed; or (3) why
actions are considered unnecessary. Also, please furnish us copies of
any correspondence or directives issued as a result of this review.
We provided a copy of this memorandum to the auditee.
If you have any questions, please contact me or James D. McKay, Assistant
District Inspector General for Audit, at (404) 331-3369, or Sam
Daugherty, Senior Auditor, at (904) 232-1226.
Attachments:
1 - Findings and Recommendations
2 - Schedule of Ineligible and Unsupported Costs
ATTACHMENT 1
FINDINGS AND RECOMMENDATIONS
1. Federal Funds were used to Pay the Health and Dental Insurance
Payments for a Non-Employee
HHA used federal funds totaling $4,428 to pay the health and dental
insurance premiums for the executive director's (ED) divorced spouse.
The divorce decree, dated January 26, 1993, required the ED to pay the
spouse's health insurance for three years. The ED converted his health
and dental insurance from a family plan to single plans. The divorced
spouse was carried as a single person.
During our review period, the HHA prorated the premiums for the divorced
spouse to each HHA cost center based on a predetermined formula. The HHA
charged $4,428 to federally funded programs during the two-year period.
We believe the ED is responsible for the premiums rather than the federal
programs, and he should reimburse the authority.
Recommendations
We recommend you:
1A. Require the ED to reimburse HHA $4,428 for the spouse's insurance
costs.
1B. Require HHA to implement control procedures to prevent future
similar payments.
2. Travel Expenses Included Executive Director's Personal Expenses and
Duplicate billings
Generally, the ED did not provide receipts supporting his expenditures,
and the HHA did not reconcile the ED's submissions. As a result, HHA
paid travel expenses totaling $8,319 to or on behalf of the ED for
personal expenses (ie: vacations - $1,378, local meals and entertainment
- $3,424, and non-HHA business trips - $3,038) and duplicate Diners Club
billings ($479). The HHA allocated the costs to the public housing and
Section 8 programs.
The ED generally obtained an HHA advance before each trip. Upon return,
he completed a travel expense report showing the use of funds advanced
for travel. Later, he submitted his personal monthly Diners Club
statements for reimbursement. He generally did not include receipts
supporting the statements. The HHA made payments directly to Diners
Club. Occasionally, the ED reimbursed the HHA for some personal
expenses. We considered the reimbursements in our review.
We found the Diners Club statements included hotel and car rental charges
for vacations to California in November and December 1993 and San Juan,
Puerto Rico in August 1994. The ED reimbursed the HHA for some personal
expenses which we considered in our analyses. The total personal costs
not reimbursed by the ED were $1,378.
The Diners Club charges also included $3,424 for personal dining and
entertainment expenses in and around the Miami metropolitan area. The
expenses were not for official duties.
The ED also incurred travel costs as a board member of the Housing
Authority Risk Retention Group (HARRG). HARRG is an entity organized to
provide hazard insurance to participating housing authorities. HARRG
staff informed us they had reimbursed the ED for several trips but did
not provide us copies of the vouchers submitted. Our review showed the
HHA reimbursed the ED $2,005 and paid Diners Club charges of $1,033 for
travel costs involving HARRG functions. The HHA did not receive
reimbursement from the ED or HARRG for these costs. We were unable to
determine whether the ED received reimbursement from HAARG for the same
trips.
We also noted the ED received duplicate payment for some travel costs.
We compared costs claimed on the travel expense reports to the Diners
Club statements. We found $479 was claimed as expenses on the travel
expense reports and on the Diners Club statements. In effect, the ED
received funds for expenses which were also claimed on the Diners Club.
This was probably the result of not providing receipts with the travel
expense report or Diners Club charge billings.
The HHA charged all travel during the review period to the PH and
Section 8 expense accounts. We found no travel charges to the HHA's
other cost centers such as the Affordable Housing program (564 units) or
City Managed properties (100 units). In our opinion, some of the travel
costs should be allocated to other cost centers.
The ED agreed some costs were personal and should not have been paid by
the HHA. But, he explained the Board of Commissioners agreed several
years ago to provide $300 monthly for his expenses. We found no record
of this agreement in the board minutes or the terms of the employment
contract. The HHA's travel manual requires detailed support for travel
reimbursements and advances.
We do not believe the ED should be provided an expense account requiring
no supporting invoices. We believe the HHA needs to improve its controls
over travel expenses. Also, we believe the ED should reimburse the HHA
for his personal expenses and duplicate costs.
Recommendations
We recommend you:
2A. Require the ED reimburse HHA $8,319 for ineligible travel costs.
2B. Require HHA to develop and implement control procedures to prevent
similar situations.
3. Executive Director's Compensatory Time Payments were Questionable
HHA's personnel policies and procedures provide for payment of overtime
pay for maintenance employees and compensatory time off for
administrative employees. The personnel policy states "an administrative
employee may be granted compensatory time off in lieu of compensation, at
the rate of one and one half hours for each hour of overtime worked."
However, the ED's employment contract provides that the employee may
convert up to one-half of any unused compensatory time to salary - up to
60 working days. The contract terms and conditions specify the contract
is for a two year period. Accordingly, we believe the contract limits
the conversion to 60 days during the two year contract period.
During the audit period the ED converted 1,747.9 hours to salary
amounting to $84,000. The following schedule summarizes the overtime
payments:
Overtime Comp
Date Check No Amount Hours Time (a) Hrly Rate
10/13/93 9371 $12,500.10 186.01 279.02 $44.80
1/27/94 13191 $20,000.00 283.44 425.17 $47.04
7/22/94 20601 $12,500.00 177.15 265.73 $47.04
7/25/94 20603 $12,500.00 177.15 265.73 $47.04
2/24/95 29602 $26,503.82 341.50 512.25 $51.74
Totals $84,003.92 1,165.25 1,747.90
(a) Compensatory time was allowed at time and a half.
We believe the ED received more overtime salary than allowed by his
contract. Based on the 60 day limit for a two year period, we believe
the ED was entitled to payment for only 720 hours (60 days x 8 hours x
1.5) or approximately $33,868 (720 hours x $47.04). Accordingly, the ED
was overpaid approximately $50,135 ($84,003 - $33,868) for 1,027.9 hours
(1,747.9 hours - 720 hours).
Our review of the time sheets showed compensatory time was not always
promptly or accurately deducted when taken. For example, the ED's time
sheets did not reflect deductions to correspond with the conversions in
October 1993, January 1994, or February 1995. Time sheets were not
available for the period May 10, 1994 through August 1, 1994. However,
based on the ending and beginning balances for those months, we concluded
a deduction was not made for the July 1994 conversion. The time sheets
reflected deductions of 354.3 hours on December 20, 1993, and 579.83
hours on November 7, 1994. We were unable to reconcile the deductions to
the checks written. However, in total the time sheets reflect a total
deduction of 934.13 hours, while payments were made for 1,165.25 hours
(1,747.9 overtime hours). Accordingly, the overtime balance at April 10,
1995 is overstated by at least 231.12 hours (1,165.25 - 934.13 hours).
We also noted unexplained increases to compensatory time balances. For
example, the time sheets reflected an ending balance of 926.5 hours at
March 28, 1994, but a beginning balance of 1173.67 hours at March 29,
1994, an unexplained increase of 247.17 hours. Two time sheets existed
for the period March 14, to March 27, 1995. One reflected a beginning
balance of 878 hours while the other reflected a beginning balance of
1310.15 hours. The latter one was not used because the time sheet for
March 28 to April 10, 1995 used a beginning balance of 878 hours.
Generally, the time sheets lacked explanations to support the overtime
hours. In cases where explanations were provided, the explanations did
not appear sufficient. For example, some time sheets indicated the hours
were earned for routine activities such as attending routine board
meetings, attending seminars, reading mail, and returning calls.
HHA's payment policies require either the Chairman's or Vice Chairman's
signature for checks over $15,000. We noted two checks were issued for
the July 1994 conversion. The checks were written within 3 days and were
signed by the ED and executive secretary. Separate checks appear to have
been written to bypass the signature requirement.
Based on our review of compensatory time sheets, we believe the ED's
compensatory time balance at April 10, 1995 is overstated by 478.29 hours
(231.12 hours not deducted for payment and 247.17 unexplained increase).
At the ED's current rate of pay, the overstatement represents $37,120
(478.29 hours x 1.5 x $51.74).
In summary, the HHA paid the ED more overtime salary than allowed by his
contract, lacked supporting time sheets for several pay periods, did not
obtain the required check signature, did not make proper or accurate
adjustments when time was converted to salary and did not have proper
support for an increase.
Recommendations
We recommend you:
3A. Require the ED reimburse HHA $50,135 for excess overtime payments.
3B. Require the HHA to terminate the conversion practice.
Alternatively, if allowed to retain the practice, the HHA must
adjust its records and improve its control procedures to prevent
future excessive payments.
4. Conflicts of Interest
Conflict of interest provisions in the HAP (Housing Assistance Payment)
contracts provide that no PHA employee or political official who
exercises functions or responsibilities with respect to the Section 8
program shall have any direct or indirect interest in the Housing
Assistance Contract.
The HHA executed HAP contracts with the City of Hialeah Mayor (who is
also a close business associate and friend of the ED). One contract was
awarded in 1986 and the second contract was awarded in 1994. During
1994, the HHA paid $5,426 to the Mayor as a Section 8 landlord.
The HHA also executed HAP contracts with an individual who is a close
business partner and friend of the ED. During 1994, the HHA paid the
individual $8,938 directly and $6,390 to the individual and another
person as joint payees.
We believe the contracts represent a conflict of interest and that the
contracts should be canceled or assigned to another authority.
Recommendations
We recommend you:
4A. Consider terminating the contracts or assigning them to another
authority.
5. Operating Reserves Underfunded and Disbursed Prematurely
HUD's policies and procedures for PHA owned rental housing and the
Section 8 program allow PHAs to establish an operating reserve.
Generally, the PHA owned operating reserve funds are intended to offset
any operating deficits occurring in any fiscal year (i.e., the amount by
which operating expenditures exceed operating receipts for such fiscal
year). Section 8 operating reserve funds may be used for other housing
purposes consistent with the PHA's authority under State and local law,
provided that the amounts used for other housing purposes are not
required for projected administrative expenses through remaining ACC
terms. Also, the use of any Section 8 operating reserves requires board
approval.
The HHA may have used some of its PHA owned operating reserve funds to
fund operations of non PHA owned rental housing activities. We noted
deficit balances for the day care center ($21,104), Affordable Housing
program ($128,236), and Palm Center ($85,327). Apparently, funds were
borrowed from HHA's operating account to cover the deficit balances in
non-federal programs.
Since the HHA does not reconcile the balance sheet cash accounts monthly,
we have concerns cash controls are inadequate. Therefore, federal funds
may have been used for expenses unrelated to the federal program the
funds were intended.
Our review disclosed $200,000 was withdrawn from the Section 8 operating
reserve account during 1994. Funds were invested in a certificate of
deposit and accounted in HHA's Development Account books and records.
According to a HHA official, the funds were placed in an investment
account to accumulate funds for future development. He said the HHA
planned to construct an administration building.
We believe the $200,000 withdrawal was improper because: (1) the HHA had
not determined the funds would not be needed for the remaining ACC terms,
(2) the withdrawal lacked board approval, and (3) there is no immediate
need for the funds. We believe the funds and any earned interest should
be transferred back to the Section 8 program.
Recommendations
We recommend you:
5A. Require the HHA reimburse the Section 8 operating reserve account
$200,000 plus earned interest income.
5B. Remind the HHA that PHA owned reserve funds can not be used for
non-federal programs.
6. Tenant Accounts Receivable Not Properly Recorded
HUD requires PHAs to prevent and correct minor errors and omissions in
the determination of Section 8 contract rents. Such minor errors and
omissions include those which affect the tenant's share of the contract
rent. If the tenant's share of the rent was incorrectly established too
low due to a tenant error or omission, the PHA may require repayment by
the family within a reasonable period of time.
The HHA established a repayment policy for tenants whose rents were
incorrectly established too low due to a tenant error or omission. At
May 12, 1995, the HHA had accounts receivable totaling $14,734 from 12
Section 8 tenants. We noted that the HHA did not record the accounts
receivable in the general ledger and that the HHA lacked adequate
internal controls over the collections.
The Section 8 department was responsible for determining and collecting
accounts receivable from tenants. The same person who determined a
receivable may also collect the receivable.
To strengthen controls, we believe tenant accounts receivable should be
booked in the formal Section 8 accounting records maintained by the
accounting department. The Section 8 department should notify the
accounting department of agreements with tenants. The accounting
department should be responsible for collections and management of the
receivables in accordance with prudent collection and accounting
procedures.
Recommendations
We recommend you:
6A. Require the tenant accounts receivable be recorded in the formal
Section 8 accounting records.
6B. Require the HHA improve its controls over the recording and
collection of the accounts.
7. Staff Resources Need to be better controlled
We noted the executive secretary accompanied the ED on at least five out
of town trips. All five trips were for HARRG functions and did not
appear to be related to HHA operations. The trips resulted in
unnecessary travel costs and lost productivity. Because the hotel and
air fare receipts were commingled with other costs, we did not determine
the related travel costs. We estimate the lost productivity for the
executive secretary salary at $3,045.
The ED had other non-HHA business interests. These interests included
real estate development, ownership, and rental property management. The
executive secretary assisted in managing the personal real estate files.
The subject files were located in her office with numerous notes
instructing her on what to do.
The ED provided a loan to a friend to start a retail paint store.
We observed the HHA maintenance coordinator and his HHA assigned truck at
the store on June 8, 1995. The employee was stocking paint. Our review
of the employee's time records indicate the employee phoned in sick on
that date. In fact, the employee had phoned sick on numerous occasions
during the week before our encounter. We believe the ED had knowledge
and should have taken steps to prevent the employee's infraction of the
HHA's leave policy and misuse of HHA equipment.
Recommendations
We recommend you:
7A. Remind the HHA that travel must be limited to employees who have a
need to attend the training that directly benefits the
administration of the federal programs.
7B. Require the HHA to improve its controls over use of sick leave and
HHA equipment.
8. Improper Section 8 Tenant Preferences
Our review of the Section 8 program disclosed certain applicants for
assistance may have received preferential treatment.
We selected a sample of applicants and analyzed the average number of
days the applicants were on the Section 8 waiting list before assistance
was provided. For a two bedroom unit, the average number of days from
application to move in date was 1,479 days. For a three bedroom unit,
the average number of days was 1,340. We reviewed the files for seven
applicants selected at random or who received assistance well under the
average waiting period.
Three families appear to have been placed in housing due to the influence
of a HHA official. File information indicates two families were provided
assistance even though they were not income eligible. One family waited
530 days, or 949 days (approximately two years) less than the average.
The third family received assistance even though they were never on the
waiting list. This family's waiting period was 32 days, or 1,308 days
(approximately three years) less than the average. The files contained
notes which indicated the HHA official may have directed the staff to do
less than a thorough review of income for the two families which were not
income eligible. The file for the third family indicated the official
instructed Section 8 staff to admit the family even though they were not
on the wait list.
Indications of possible preferential treatment were also noted for four
other families. The mother of the Section 8 coordinator waited 737 days,
or 742 days (approximately two years) less than the average. The parents
of the Mayor's secretary waited 448 days, or 1,031 days (approximately
three years) less than the average. Lastly, two HHA employees were
provided assistance. One of the two waited 1,095 days, or 245 days
(approximately eight months) less than the average. Also, they were
admitted when other applicants had submitted applications up to three
years before them and are still on the waiting list.
The files indicate HHA officials may not have administered the Section 8
program fairly to all applicants.
Recommendation
We recommend you:
8A. Review the Section 8 program during your next monitoring visit.
8B. Remind the HHA that applicants must be fairly selected in accordance
with HUD requirements.
9. Procurement Actions were not in Compliance with Policies and
Procedures
The HHA's Procurement Policy requires the ED to solicit bids or informal
proposals from at least three suppliers for purchases and contracts
between $10,000 and $24,999. For purchases and contracts $25,000 and
above, the ED must obtain sealed bids, via advertisement, to be opened at
a public meeting of the Board of Commissioners. The ED must maintain a
file that documents the solicitation, and the bids or proposals received
and contracts awarded.
The procurement policy also requires that checks issued for $15,000 or
more be signed by either the Chairman or Vice-Chairman of the Board of
Directors.
Our review of selected procurement transactions disclosed several
violations.
A. Garbage services contract not competitively awarded
The HHA awarded an annual $43,800 garbage services contract to Central
Hauling Systems in 1987. In October 1993, the HHA awarded a two year
contract to Central Holding Systems. There was no evidence of formal
competitive bidding. The ED explained the contractor changed names and
the contract was renewed due to a favorable price. However, we noted the
contract increased to an annual amount of $55,200 and believe the
contract should have been re-bid.
Subsequently the owner died and Waste Management of Dade County purchased
the franchise. In February 1994, the HHA executed a contract for the
same amount and scope of services with Waste Management. The ED
explained the contract was not re-bid because Waste Management was
willing to assume the contract for the same price. We noted the contract
with Central Holding Systems did contain a provision that the contract
could be assigned and was binding upon such assigns, successors or
personal representatives.
Additionally, the ED may have violated the procurement code of conduct
due to a possible conflict of interest. The ED personally contracted
with Central Holding Systems for trash removal services, between October
1991 and April 1992, for at least one multifamily-property he owned.
Thus, the ED may have violated the HHA's code of conduct in letting the
contract with Central Holding Systems in October 1993. The code of
conduct for procurement states that no officer of the PHA shall
participate in selection or award of a contract if a conflict of
interest, real or apparent, would be involved.
B. Ranges not competitively awarded
The HHA purchased 133 ranges at a cost of $26,008.50 from Garcia Home
Appliances. The HHA could not demonstrate the purchase was competitively
awarded.
In addition, we found that payments may have been split to circumvent
board approval. We found four checks to Garcia Home Appliances, each
dated July 15, 1993, totaling $26,008.50. The first check for $4,513.50
was for the purchase of 23 ranges. A second check for $21,495 was
voided. The remaining two checks were each for $10,747.50, exactly
one-half of the voided check amount. We found a supporting invoice for
110 ranges which, coincidentally, matched the voided check amount of
$21,495.00. In our opinion, the voided check was split into two checks,
for $10,747.50 each, to circumvent required board signature for checks
over $15,000.
The ED could not explain why the voided check amount was split into two
checks. However, the ED contends that the purchase was not subject to
formal bidding because less than $25,000 was attributable to public
housing. He explained that $4,513.50 of the total purchase price was for
another program, Comprehensive Grant. Therefore, he reasoned the total
cost to public housing was less than $25,000 ($26,008.50 - $4,513.50 =
$21,495.00) and, therefore, did not require formal bidding procedures.
We do not agree with the ED's position, since purchases through the
Comprehensive Grant program are also for public housing. However, even
if the ED's position is accepted, documentation of an informal bid
process would have been required. The HHA also could not document that
it followed the informal bidding requirements. Accordingly, the HHA
lacks assurance that it obtained the ranges at the best price.
C. Audit services not competitively awarded
The HHA's procurement policy indicates competitive proposal procedures
should be used when obtaining professional services such as legal
services and accounting. In this process, competitors' qualifications
are evaluated and the most qualified competition is selected, subject to
negotiation of fair and reasonable compensation.
The HHA's November 3, 1994 board minutes show that the authority did not
use competitive procurement procedures in awarding the fiscal year 1994
audit contract to the Certified Public Accountant (CPA). The minutes
reflect a discussion concerning the award and that a board member asked
if it was necessary to go out for bids. The ED responded that bids were
not required and that the CPA did this service for the HHA year after
year. The minutes reflect the ED also said that the auditors had to be
approved by HUD, that there were only about fifty auditors throughout the
United States, and locally there were none. The board then approved the
firm to perform the 1994 audit.
The ED's statements were misleading because: the auditors do not have to
be approved by HUD, and there are many qualified firms throughout the
United States.
D. Unsupported and Split Disbursements
The HHA issued six checks during 1993, totaling $85,000, to AAM
Management Corporation. The HHA did not have invoices or other
supporting documentation to support the disbursements, which were charged
to the Affordable Housing program. Additionally, four of the six checks,
totaling $53,000, were consecutive in number and issued on the same day.
Each of the four checks was issued for less than $15,000; three were for
$14,000 and one was for $11,000. The amounts indicate that several
checks were issued in order to circumvent required board signature for
checks over $15,000. However, we were not able to obtain evidence of
this supposition since no invoices to support the checks were found.
We believe these examples demonstrate the HHA needs to improve its
procurement practices.
Recommendations
We recommend you:
9A. Require the HHA to justify the procurement actions and unsupported
disbursements.
9B. Require the HHA to improve its controls over procurement actions.
10. Salaries of the Executive Director and Executive Secretary and
Allocations of Administrative Salaries were Questionable
Salaries of the ED ($113,000) and Executive Secretary ($41,976) may be
excessive for the size of the authority. The ED advised us that no
salary comparability study had been performed for several years. The
HHA's April 22, 1993 board minutes indicate the ED's salary was compared
to other authorities in the State. However, the minutes do not indicate
the amounts involved, and do not discuss any other positions.
Administrative salaries were not allocated to the HHA's activities in
proportion with the cost center benefiting from the efforts. The ED
advised there was no real basis for the allocation of salary costs. He
said he desired to limit the costs to the Section 8 and other programs.
Our review disclosed salary allocations were inordinate. For example,
the ED's salary was charged only to Public Housing (86 percent),
Patterson (4 percent), Affordable Housing (8 percent), and Comp Grant
(2 percent). Nothing was charged to the Section 8 programs, City managed
programs, or day care. Affordable Housing has 545 units of low income
housing. Because the size of Affordable Housing is about one half that
of Public Housing (1003 units), the amount allocated appears small.
Examples for other employees are as follows:
1. The Executive Secretary's salary was charged to Public Housing
(88 percent) and Patterson (12 percent). We believe this allocation
is not appropriate. Salaries should be allocated to all programs the
employee works with. We believe the Executive Secretary would be
involved with all programs at some time or the other.
2. The Director of Finance's salary was charged to Public Housing
(83 percent), Patterson (12 percent), and Comp Grant (2 percent).
The accounting for the Section 8 and Affordable housing is as much
if not more than Public Housing, and thus some costs should be
charged to these programs also.
3. The manager and assistant manager of the Affordable Housing program
were charged to the Hot Meals and Patterson programs. These
programs are not related to the Affordable Housing program, and
there was no justification for this allocation.
We believe the HHA needs to perform a salary comparability study and
develop a sound basis for proper allocation of administrative costs.
Recommendations
We recommend you:
10A. Require the HHA obtain a salary comparability study.
10B. Require the HHA develop and implement a proper cost allocation
system.
11. Pooling of Funds did not comply with HUD Requirements
HUD allows three ways of pooling of funds for payment of joint expenses.
The methods are referred to as limited, or unlimited revolving funds, or
a master account. Each has restrictions. In general, the intent is to
pool funds together to pay expenses shared by each participating cost
center (i.e., federal and non-federal programs). Funds are directly
deposited or transferred to the pooled account in advance to cover
anticipated expenses. At no time are the funds of one cost center to pay
the expenses of another.
The HHA's method of making payments for cost centers does not comply with
HUD requirements. HHA established a checking account, referred to as a
revolving fund account, in which federal funds are directly deposited.
Checks were drawn on the account to pay expenses of the participating
cost centers (approximately nine federal and non-federal programs
participate). Cost centers were to reimburse the revolving fund account
monthly.
Our review disclosed cash in the revolving fund account was not
reconciled to each cost center monthly. We were unable to determine the
amount in the revolving fund account that was federal or non-federal.
At December 31, 1994, non-federal programs lacked sufficient cash to
cover their expenses. As a result, the non-federal programs owed the
federal programs $242,281. In effect, federal funds have been used to
finance the operations of the non-federal programs.
We believe the HHA needs to improve its controls over the revolving funds
account.
Recommendations
We recommend you:
11A. Require the HHA to adopt a HUD acceptable method.
11B. Require the HHA to improve its controls over the revolving fund, by
ATTACHMENT 2
SCHEDULE OF INELIGIBLE COSTS
Recommendation Ineligible Costs[1] Unsupported Costs[2]
requiring monthly reconciliations.
1A $4,428
2A 8,319
3A 50,135
5A 200,000
9A $85,000
Total $262,882 $85,000
[1] Costs not allowable by law, contract, HUD or local agency policies
or regulations.
[2] Costs not clearly eligible or ineligible but warrant being contested
(e.g., lack of satisfactory documentation to support the eligibility
of the cost.)
.
Hialeah HA, Hialeah, FL
Published by the Department of Housing and Urban Development, Office of Inspector General on 1995-10-18.
Below is a raw (and likely hideous) rendition of the original report. (PDF)