oversight

HA of the City of Dania, Dania, FL

Published by the Department of Housing and Urban Development, Office of Inspector General on 1996-09-04.

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

                                                                 U.S. Department of Housing and Urban Development

                                                                 District Office of the Inspector General
                                                                 Richard B. Russell Federal Building
                                                                 75 Spring Street, SW, Room 700
                                                                 Atlanta, GA 30303-3388
                                                                 (404) 331-3369




September 4, 1996                                                 Audit Related Memorandum
                                                                  No. 96-AT-203-1825


MEMORANDUM FOR:                   Paul K. Turner, Director, Office of Public Housing, Jacksonville,
                                      Florida, 4HPH; and*
                                  Karen Cato-Turner, Acting Director, Office of Public Housing,
                                      Coral Gables, Florida, 4DPH


FROM:       Nancy H. Cooper
            Acting District Inspector General for Audit-Southeast/Caribbean, 4AGA


SUBJECT:         Operation Safe Home Probe
                 Housing Authority of the City of Dania (DHA)
                 Dania, Florida


For Operation Safe Home, we did a limite d
probe of selected activities of the Housin g
Authority, City of Dania. We tailored ou r
efforts primarily to identify indications o f
fraud or other wrongdoing, and progra m
abuse.

We interviewed DHA personnel and tenants,
and U.S. Department of Housing and Urba n
Development (HUD) staff. Activities wer e
reviewed based on information obtain ed in the
interviews, and from DHA records durin g
September 1995 through June 1996. Thi s
probe was not a d etailed audit of DHA or any
of its activities.




*   There currently is a transitional period between the Jacksonville and Coral Gables offices for oversight of South
    Florida publ ic housing authorities. Therefore we jointly addressed this document. Coral Gables is the lead office
    for clearance of the controlled audit recommendations.
In conducting the probe, we identified administrative deficiencies that warrant your and DHA's
attention. We did not develop the deficiencies as fully as we normally would to meet reporting
standards for generally accepted government auditing standards.


                                          SUMMARY

Four relatives or extended family members of a former acting executive director (acting ED )
misrepresented their total housing expenses and/or preference status to obtain Section 8
assistance. The acting ED should have at least suspected the abuses. Section 8 assistanc e
totaling $28,424 through March 1996 was paid on their behalf rather than for families on th e
waiting list longer. We recommend term ination of Section 8 assistance for the four families, and
that consideration be given to having them reimburse the Section 8 program for all assistanc e
received. We further recommend a Limited Denial of Participation (LDP) for the acting ED and
the four family members.

In October 1995, the DHA Board entered into a management contract without adequatel y
establishing whet her its terms and conditions were in the best interests of DHA. In general, the
1-year contract provided for the contractor to manage DHA's day to day operations for $130,000
annually, payable p ro-rata monthly. The DHA should have conducted procurement to promote
open competition, but did not do so . There were other deficiencies including inadequate history
of the procurement, and inappropriate contract terms and conditions. Also, an appearance o f
favoritism existed in the procurement of two contracts; and accounting services were no t
periodically re-bid. W e recommend DHA terminate the management contract, and take needed
measures to safeguard its and HUD's interests when procuring goods and services.

More details of our findings are in Attachme nt 1. We are providing a copy of this memorandum
to the auditee.

Within 60 days, please provide, for each recommendation in Attachment 1, a status report on :
(1) the corrective actions taken; (2) the proposed co rrective actions and the date to be completed;
(3) why actions are considered unnecessary. Also, furnish us copies of any relate d
correspondence or directives issued. Please keep in mind the recent reemphasis for timel y
management decisions on controlled recommendations.

If you have any questions, please contact Ted E. Drucker, 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
    3 - Distribution




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                                                                                 ATTACHMENT 1

                           FINDINGS and RECOMMENDATIONS


1. Relatives and Extended-Family Members of an Acting Executive Director Submitted False
   Data and Obtained Section 8 Assistance

Four relatives or extended-family members of an acting ED abused the Section 8 assistanc e
program, and misrepresented their total housing expenses and/or preference status to obtai n
Section 8 assistance sooner t han other applicants. The acting ED should have at least suspected
the abuses, and prevented them. S ection 8 assistance totaling $28,424 through March 1996 was
paid on their behalf, rather than for others on the waiting list who were denied timely assistance.

Criteria

According to the DHA Section 8 Administrative Plan, applicants have three preference categories
(in order of most to least preference): (1) disab led or displaced persons; (2) substandard housing
or paying over 50 percent of income for rent plus utilities; and (3) no preference. The waiting
list is sorted first by the priority of each preference type, and then, within each preferenc e
category, by time the application is submitted.

Public Housing Authorities (PHAs) are required to verify family income and o ther factors relating
to eligibility and amount of assistance [Title 24 Code of Federal Regulations {CFR} 882.116(c)].
Also, the DHA Section 8 Administrative Plan requires that all information submitted b y
applicants be verified.

PHAs should verify that applicants claiming a Federal preference qualify for that preference [24
CFR 882.219(c)(3)]. Federal preferences are involuntary displacement, living in substandar d
housing, and paying more than 50 percent of family income for rent.

Deficiencies

The following tenants received Section 8 certificates or vouchers based on incorrect preference
claims: (1) the sister of acting ED (t enant # 91464); (2) niece of acting ED (tenant # 91479); (3)
the acting ED's sister-in-law's sister (tenant # 91699); and, (4) t he mother of acting ED's nephew's
child (tenant # 91761). As a result, they improperly moved ahead of other applicants.

    Tenant # 91464

    The acting ED's sister applied for housing assistance on June 1 5, 1994 and received a Section
    8 voucher on June 20, five days later. The sister received preferential treatment.

    The sister claimed one Federal preference on her application, paying more than 50 percent
    of family income as rent. Even if the 50 percent preference were warranted, ten of the first
    23 applicants still on the waiting list of September 1995 should have received assistanc e
    before her. A total of $12,044 in Housing Assistance Payments (HAPs) were made for this


                                                  3
relative through March 1996.




                               4
The sister was not entitled to the 50 percent Federal preference claimed. She provided a false
lease with a private sector landlord to substantiate the preference. Contrary to information
on the lease provided, the sister lived in Pompano Beach public housing at the time of th e
application. As a public housing resident, she would have only paid 30 percent of adjusted
family income as rent and, thus, she was not qualified for the 50 percent preference.

The sister also provided incorrect information on her applica tion including: (1) the landlord's
name and rent paid (same as on the nonexistent lease); and (2) a claim of paying more than
50 percent of family income for rent. Because the sister provided false information, w e
believe she willingly participated in a scheme to receive housing assistance. We found n o
indications that DHA independently verified this information. Specifically, verification of
the lease and the rent paid sho uld have been obtained from the landlord and/or rent receipts.


Tenant # 91479

The acting ED's niece applied for housing assistance on June 15, 1994 and was given a
Section 8 certificate on Sept ember 16, about 3 months later. A review of the September 14,
1995 waiting list revealed the niece received preferential treatment.

The niece claimed one Federal preference on the application, paying more than 50 percent
of family income as rent. However, even after the 50 percent preference is considered, 10
of the first 23 applicants still on the waiting list should have received assistance before her.
Consequently, by receiving preferential treatment, the niece deprived others of housin g
assistance. A total of $10,809 in HAPs were made on behalf of this relative through March
1996.

The niece was not entitled to the 50 percent Federal prefe rence claimed. She provided a fake
lease which reflected $400 per month rent paid to a p rivate sector landlord to substantiate the
preference. Contrary to that information on the lease, the niece admitted, to us, living with
the mother of the acting ED for $50 a month at the time of the application.

Furthermore, the niece provided false information on the app lication for assistance including:
(1) current address (same as the nonexistent lease); (2) landlord's name, address and amount
paid (name and amount paid same as the nonexistent lease); and (3) a claim of paying more
than 50 percent of family income for rent. We found no indications that DHA independently
verified this information through the landlord and/or rent receipts.


Tenant # 91699

A sister of the acting ED's sister-in-law applied for housing assistance on January 14, 1995
and was given a Section 8 cer tificate on February 15, 32 days later. Based on our review of
the September 14, 1995 waiting list, this tenant received preferential treatment.




                                             5
She claimed one Federal preference on the application, paying more than 50 percent o f
family income as rent. After the 50 percent preference is considered, 12 of the first 2 3
applicants still on the waiting list shou ld have received assistance before her. Consequently,
by claiming preferential treatment, she knowingly prevented housing a ssistance to others who
had applied earlier. A total of $2,628 in HAPs were made on behalf of this family member
through March 1996.

This tenant was not entitled to the 50 percent Federal preference she claimed on he r
application. She r eported a monthly income of $1,564 and a monthly rent of $450 or about
28 percent. The DHA disregarded this information.

When this tenant applied to the program, the acting ED was employed with DHA as th e
housing assistant responsible for the entire Section 8 Program, including processing an d
selecting applicants for assi stance. However, the acting ED delegated the processing of this
application to the program assistant responsible for the public housing program.


Tenant # 91761

The mother of the acting ED's nephew's child applied for housing assista nce on June 14, 1994
and was given a Section 8 certificate on March 9, 1995, about 9 months later. Based on the
September 14, 1995 waiting list, this tenant received preferential treatment.

The tenant claimed one Federal preference on the application, paying more than 50 percent
of family income as rent. However, even after the 50 percent preference is considered, 10
applicants still on the waiting list should have received assistance before her. By inducing
preferential treatm ent, this tenant effectively prevented housing assistance to others. A total
of $2,943 in HAPs were made on her behalf through March 1996.

This tenant was not entitled to the 50 percent Federal preference she claimed. On he r
application, she reported a monthly income of $1,000 and a monthly rent of $200 or 2 0
percent.




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In summary, the acting E D
should have known that eac h                                                Months
of the cited applicants applie d
for assistance.         As o f                            15.8
September       1995,     other         17
                                        16
applicants remained on th e             15

waiting list who should hav e           14
                                        13
received assistance prior to all        12

four of these tenants. Ou r             11                                               9
                                        10
random sampling of 21 of 378             9

tenants, or 5.6 percent ,                8
                                         7
disclosed the average wait time          6

from application to receipt o f          5
                                         4
Section 8 assistance was 15. 8           3
months. Three of these fou r             2
                                         1
received acceptance within 3             0
months, and the other received                     Avg. Wait (21 tenants)            Tenant 91761


assistance within 9 months.


According to the acting ED, each of the cited cases was processed by the housing assistant and
never reviewed by her. The acting ED explained that the housing assistant gave preferentia l
treatment to the acting ED's family members to gain influence over her. However, thi s
explanation seems unlikely because all four actively participated in the deception by providing
false and incorrect information to justify preference.

In each case, the acting ED ei ther knew or should have known preferential treatment was given.
At a minimum, the acting ED was responsible for proper process ing of these cases, which did not
occur. The acting ED's failure to review these cases under the known circumstances was, at a
minimum, serious neglect. Similarly, because the four tenants benefitted and gained th e
preferences by providing false informa tion, we believe they should be held accountable for their
actions by having their Section 8 assistance canceled.

Recommendations

We recommend you:

1A.    Issue LDPs against the former acting ED and the four tenants.

1B.    Have the DHA cancel the certificates and vouchers of the four tenants based on thei r
       misrepresentations.

1C.    With the advice of HUD Counsel, tell th e DHA whether the four tenants should repay the
       housing assistance made on their behalf through the date the assistance is terminated .
       (Through March 1996, the payments totaled $28,424.)




                                               7
2. Procurement of Professional Management Services Was Deficient

In October 1995, the DHA Board entered into a 1-year management contract for $130,00 0
without adhering to procurement procedure s. Our review of this contract disclosed procurement
deficiencies including: (1) inadequate pr ocurement history, (2) award without documentation of
competition, (3) lack of adequate statement of work, (4) no request for proposal, and (5) other
imprudent contract terms and conditions. Consequently, the contract was not in the best interests
of DHA.

  Inadequate Procurement History - The DHA did not maintain records detailing the significant
  history of the management services procurement as required. According to 24 CF R
  85.36(b)(9) and HUD Handbook 7460.8 REV-1 paragraph 3-12, records will be maintained
  in a contract file including, but not limited to, rationale for the method of procurement ,
  selection of contract type, contractor selection or re jection, and the basis for the contract price.
  The DHA could not show:

     - The rationale for the contracting method; or for contracting a management compan y
       rather than an individual executive director.

     - The advertisement soliciting applications and proposals, or statement of work.

     - Evidence that the HA directly solicited potential bidders.

  Further, maintaining these records would be helpful in speeding up future similar procurement
  since the HA would not have to recreate solicitation documents.

  Contract Awarded Without Documentation of Competition - The contract was awarde d
  without competition to the sole management company bidder. The president of th e
  management firm was both a former attorney and a consultant for the DHA. According t o
  Handbook 7460.8 REV-1 paragraph 2-6, housing authorities are to conduct all procurement
  by full and open competition, and to allow all responsible sources to compete. In exceptional
  cases, a noncompetitive proposals method may be used, provided a written justification i s
  prepared concluding competition was determined inadequate as prescribed in 24 CF R
  85.36(d)(4). We did not find justification prepared by the DHA that competition wa s
  determined inadequate.

  Lack of Adequate Statement of Work - An adequate statement o f work was not included in the
  contract. For services contracts, the HA should prepare a detailed statement of wor k
  (Handbook 7460.8 REV-1 paragraph 7-3) to define the contractor's obligations, protect th e
  HA's interests, and establish a clear, unambiguous, and complete basis for performance .
  Should staffing be included, the contract should state the kind of personnel and qualifications
  required, the nature of work, and the required deliverables.




                                                  8
  The contract terms and conditions p rovided that the contractor would direct and supervise the
  operation of the DHA programs through the contractor's employees and age nts. The contractor
  would adhere to all applicable reg ulations promulgated by HUD. In our opinion, the contract
  scope of service did not su fficiently detail the work to be performed, provide measurable end
  results, and define specif ic end products. According to the DHA Board minutes, the contract
  amount was derived by calculating annual budgeted salary costs and deducting $10,000.

  No Request for Proposal (RFP) Found - We found no evidence that DHA had a request fo r
  proposals. According to Handbook 7460.8 REV-1, an RFP is needed for procurement b y
  competitive proposals. The RFP is the written solicitation to prospective offerors to submit
  a proposal based on the terms and conditions set forth therein. Proposal evaluation an d
  contractor selection are based on the factors for award as stated in every competitive RFP .
  Thus all interested parties can be aware of the buyer's wishes, and bids will be comparable.

  Other Imprudent Contract Terms and Conditions - The contract stated the contractor woul d
  receive equal monthly payments with the first payment on the effective date of the contract.
  Therefore, the contractor was paid approximately $10,800 (1/12 of the $130,000 annual fee)
  upon signing the contract and before providing any service to th e HA. Services normally must
  be provided before payment.

  This contract did not contain provisions for termination for convenience by the HA (24 CFR
  85.36(i)). The contract stated the HA could terminate the contract only for good cause upon
  written notice. Good cause was defined as "willful breach or habitual neglect" by th e
  contractor of duties defined. Early termination of the contract for any reason other than good
  cause as defined would entitle the contractor to full payment of $130,000. This "golde n
  parachute' provision impaired the effect of the termination clause.

On July 8, 1996, we brought these deficiencies to the attention of the Office of Public Housing,
Jacksonville HUD office. On August 1, the Acting Director of Public Housing in Coral Gables
advised the Chairperson of the DHA Board to determine compliance with HUD requirement s
before continuing the current management services contract.

                                      *   *    *   *    *

During the course of our review of the man agement contract, we noted other procurement issues
needing DHA and HUD attention:

  Appearance of Favoritism - We found two occasions where DHA granted contracts to a
  bidder/applicant allowed to perso nally address the Board. The contracts related to a Saratoga
  paint contract and the management contract. If one bidder/applicant was allowed to address
  the Board, then all should have been given the s ame opportunity. Allowing only one gave the
  appearance of favoritism.




                                               9
  Professional Service Contract Not Re-bid Periodically - The fee accounting professiona l
  service contract had been in effect, and not competitively re-bid, since 1987. According t o
  PIH Notice 93-34, the HA must obtain written approval from HUD to execute contracts for
  professional services in excess of 2 years or which contain a renewal p rovision. This provision
  is intended to promote competition.

Recommendations

We recommend that you have DHA:

2A. Take measures to strengthen its procurement procedures to safeguard its and HUD' s
    interests, including termination of the current management contract.

2B. Fully justify, or repay in whole or part, the $130,000 in payments to the managemen t
    contractor as being necessary, reasonable, and cost-effective.




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                                                                                           ATTACHMENT 2

                SCHEDULE OF INELIGIBLE AND UNSUPPORTED COSTS


               Recommendations                     Ineligible Costs 1              Unsupported Costs 2

                       1C                               $28,424
                       2B                                                                $130,000




1
    Costs not allowable by law, contract, HUD or local agency policies or regulations.

2
    Unsupported costs are not obviously ineligible, but warrent being contested for reasons such as lack of
    satisfactory documentation.

                                                       11
                                                                          ATTACHMENT 3


                                      DISTRIBUTION

Secretary's Representative, 4AS
Comptroller, 4AF
Director, Field Accounting Division, 4AFF
Florida State Coordinator, 4DS
Director, Office of Public Housing, Jacksonville, Fl 4HPH
Acting Director, Office of Public Housing, Coral Gables, Fl 4DPH
Chief Financial Officer, F, Room 10164 (2)
Director, Office of Internal Control and Audit Resolution, FOI (Room 10176) (2)
Associate Director, US GAO, 820 1st St. NE Union Plaza, Bldg. 2, Suite 150,
 Washington, DC 20002, (2)
Audit Liaison Officer, Public and Indian Housing, PF (Room 4122) (3)
Assistant to the Deputy Secretary for Field Management, SDF (Room 7106)
Chairperson of the Board, Dania Housing Authority
Special Agent in Charge, 4AGI




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