Issue Date
May 23, 1996
Audit Case Number
96-CH-202-1008
TO: Richard B. Kruschke, Director, Office of Public Housing, Illinois State Office
FROM: Dale L. Chouteau, District Inspector General for Audit, Midwest
SUBJECT: Rock Island Housing Authority
Low-Income Housing Program
Rock Island, Illinois
We completed an audit of the Rock Island Housing Authority. We conducted the audit at the
request of HUD's Illinois State Office. Our audit objectives were to determine whether the
Authority administered its housing activities in an efficient, effective, and economical manner
and in compliance with the terms and conditions of the Annual Contributions Contract, applicable
laws, HUD regulations, and other applicable directives. The audit did not include the Section 8
Program.
While the Rock Island Housing Authority is striving to improve its procedures, the Authority can
do more to improve the administration of its programs and ensure compliance with the Annual
Contributions Contract and other HUD requirements. This report addresses issues related to the
Authority's: (1) inadequate progress in meeting its established goals for the Vacancy Reduction
Program; (2) untimely preparation of units for occupancy; and (3) inadequate safeguarding of
inventories.
Within 60 days, please give us, for each recommendation made in the report, a status report on:
(1) the corrective action taken; (2) proposed corrective action and the date to be completed; or
(3) why action is considered unnecessary. Also, please furnish us copies of any correspondence
or directives issued because of the audit.
Should your staff have any questions, please have them contact me at (312) 353-7832.
Management Memorandum
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96-CH-202-1008 Page ii
Executive Summary
We completed an audit of the Rock Island Housing Authority. Our audit objectives were to
determine whether the Authority administered its housing activities in an efficient, effective, and
economical manner and in compliance with the terms and conditions of the Annual Contributions
Contract, applicable laws, HUD regulations, and other applicable directives. The audit did not
include the Section 8 Program.
While the Authority is striving to improve procedures, additional improvements are needed in
its administrative practices to assure compliance with the Annual Contributions Contract and
HUD requirements and to increase the efficiency, effectiveness, and economy of its operations.
The Authority needs to correct the following problems.
The Rock Island Housing Authority has not made
The Authority May Not
reasonable progress in meeting the goals it established for
Meet Its Established
the Vacancy Reduction Program. The Authority has only
Goals for the Vacancy
completed repairs for 51 of the 235 units funded, has not
Reduction Program
submitted plan revisions to HUD as required, and has not
leased the completed units timely. We attribute the reasons
for the Authority not progressing with its goals to the
inadequate Vacancy Reduction Program staffing levels and,
delays by the Occupancy Department in leasing the units.
The Rock Island Housing Authority allowed units to remain
The Authority Did Not
vacant for extended periods of time. The Authority did not
Prepare Units For
prepare and lease its vacant units within 30 calendar days.
Occupancy Timely
The Authority's 1995 Public Housing Management
Assessment Program annual average turnaround time for
vacant unit preparation was 159 days. HUD requires the
Authority to maintain an average turnaround time for
vacant units of 30 calendar days, with a goal of 10 days.
The Authority did not adequately use its Maintenance staff
and lacked sufficient staffing in its Occupancy Department
to meet the 30 calendar days requirement.
The Rock Island Housing Authority did not adequately
The Authority Did Not
safeguard its inventory of parts and supplies. Specifically,
Adequately Control Its
the Authority did not: (1) maintain adequate inventory
Inventories
records of the parts and supplies; and (2) ensure that
warehouse stock was properly safeguarded. The Director
of Administration said the Authority did not have policies
and procedures to control its warehouse inventory system.
Page iii 96-CH-202-1008
Executive Summary
We recommend that the Director of Public Housing, Illinois
Recommendations
State Office, assures that the Authority takes actions to
correct the weaknesses cited in this report.
We gave our draft findings to the Executive Director and
HUD's Illinois State Office during the audit. We held an
exit conference with the Executive Director on April 22,
1996. The Executive Director provided written comments
to our findings and recommendations. Excerpts from the
comments are included in each finding and Appendix A
contains the complete comments.
96-CH-202-1008 Page iv
Table of Contents
Management Memorandum i
Executive Summary iii
Introduction 1
Findings
1 The Authority May Not Meet Its Established
Goals for the Vacancy Reduction Program 3
2 The Authority Did Not Prepare Units For
Occupancy Timely 11
3 The Authority Did Not Adequately
Safeguard Its Inventories 17
Internal Controls 23
Follow Up On Prior Audits 25
Appendices
A Auditee Comments 27
B Distribution 31
Page v 96-CH-202-1008
Table of Contents
96-CH-202-1008 Page vi
Table of Contents
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Page vii 96-CH-202-1008
Introduction
The Rock Island Housing Authority, a non-profit corporation, was formally organized in 1941,
under the provisions established by the first U.S. Housing Act passed into law in 1937 to develop,
acquire, and operate low rent housing programs. The Authority is governed by a Board of
Commissioners consisting of five unpaid members who formulate and direct the Housing
Authority's policies. The Chairman of the Board is Anne Liggitt. The Executive Director, Mark
Stephenson, is responsible for the day-to-day operations.
The Authority manages 606 units, of which 359 units are designed for the elderly. The current
Section 8 allotment for all programs is 167. In fiscal year 1995, HUD awarded the Authority
$2,267,366 in Vacancy Reduction Program funds.
The Authority's books and records are located at its central office at 111 20th Street, Rock Island,
Illinois. The tenant files are maintained at each development and the unit files are maintained at
the Authority's warehouse.
The audit objectives were to determine whether the
Audit Objectives
Authority administered its housing activities in an efficient,
effective, and economical manner and in compliance with
the terms and conditions of the Annual Contributions
Contract, applicable laws, HUD regulations, and other
applicable directives.
To achieve the objectives, we interviewed HUD and
Audit Scope and
Authority staff to evaluate internal controls and obtain
Methodology
information relating to the Authority's operations. We
reviewed the following Authority records: (1) Public
Housing Management Assessment Program certifications
for adequate documentation and support; (2) Cooperation
Agreement to assure the Authority was not paying for
services normally received through the Agreement; (3)
maintenance and occupancy files for compliance with
applicable requirements and the effectiveness of the
programs' execution; (4) inventory ledgers to ensure that its
inventory is safeguarded and secure; and (5) Vacancy
Reduction Program grant files for proper program
execution.
The audit covered the period October 1, 1992 to September
30, 1995. We expanded the coverage as necessary. We
performed the audit between November 1995 and March
1996 at the Authority.
Page 1 96-CH-202-1008
Introduction
We conducted our audit in accordance with generally
accepted government auditing standards.
We provided a copy of our report to the Authority's
Executive Director.
96-CH-202-1008 Page 2
Finding 1
The Authority May Not Meet Its Established
Goals for the Vacancy Reduction Program
The Rock Island Housing Authority has not made reasonable progress in meeting the goals it
established for the Vacancy Reduction Program. The Authority has only completed repairs for
51 of the 235 units funded, has not submitted vacancy plan revisions to HUD as required, and
has not leased the completed units timely. We attribute the reasons for the Authority not
progressing with its goals to inadequate Vacancy Reduction Program staffing levels, and delays
by the Occupancy Department in leasing the units. As a result, the Authority cannot assure HUD
that it will complete the required work before the program completion date. Additionally, low-
income and elderly individuals were deprived of adequate housing.
24 CFR Part 968 contains regulations for housing
HUD Requirements
authorities to follow while implementing their Vacancy
Reduction Programs. Part 968.401 states it is the policy of
the Department that public housing agencies should
maximize the use of housing resources, using every
reasonable means to achieve and maintain high levels of
occupancy by eligible families in public housing authority-
owned or operated housing.
Part 968.422(3)(b) states that HUD expects most work
items funded under the Vacancy Reduction Program to be
completed within one year. Work items must be completed
within two years from the date of funding.
Article IX, paragraph 4, of the Vacancy Reduction Program
Grant Agreement requires the Authority to inform HUD
immediately, in writing, of any problems, delays, or adverse
conditions which will impair materially the Authority's
ability to comply with the Vacancy Reduction Plan, as the
same may be revised from time to time as required by HUD
or with HUD's approval. Such disclosure must include a
statement of action taken, or proposed to be taken, and any
assistance needed to resolve the situation.
The Authority's Vacancy
Reduction Program Grant
Agreement
Page 3 96-CH-202-1008
Finding 1
The Rock Island Housing Authority received a $2,267,366 Vacancy Reduction Program
grant in December 1994 to repair 235 vacant units within two years. The purpose of the
grant was to assist the Authority with preparing units for occupancy, which would lead to a
reduction in the Authority's vacancy rate. The grant also allowed for management
improvements to assist the Authority with its marketing strategies.
The Authority's Vacancy Reduction Program grant
The Authority Has Not
provided the Authority funds to repair 235 vacant units
Repaired Vacancy
between December 1994 and December 1996. As of
Reduction Units Timely
February 29, 1996, the Authority had only completed 51
units, or 21 percent of the repairs.
The Maintenance Supervisor said the easiest units were
completed first. The Assistant Director said the Authority
is in the process of obtaining bids for contract labor to
finish the remaining units because those units will be more
difficult to complete. The Assistant Director felt this would
help the Authority meet the program goals.
The Authority's Vacancy Reduction Program Plan stated the
Authority would utilize a combination of additional
employees and contract labor to coordinate, supervise, and
carry out the Vacancy Reduction Program initiatives.
However, the Authority did not hire the proposed number
of employees or contract labor to carry out the initiatives as
required.
The Authority budgeted $717,297 in its Vacancy Reduction
Program to hire 13 additional employees. However, as of
February 1996, the Authority had only hired eight of the 13
employees for the Vacancy Reduction Program. The
Authority did not hire three maintenance aides and two
preventive maintenance specialists that it had budgeted. In
addition, the Authority did not hire the contract labor as it
had originally budgeted. The Director of Administration
said the Authority was in the process of hiring two
maintenance employees. The Assistant Director said the
Authority plans to hire the three Vacancy Reduction
maintenance aides in the future.
The Vacancy Reduction Program budget included a crew
supervisor. At the beginning of the grant period, the
Authority had a vacancy crew supervisor and a normal
maintenance supervisor. However, the Authority fired the
96-CH-202-1008 Page 4
Finding 1
supervisor responsible for normal maintenance. Instead of
hiring another person for the position, the Authority
eliminated the position. The Assistant Director said it
would have taken too long to hire another supervisor. In
September 1995, the vacancy reduction supervisor was
promoted to be the supervisor for both normal maintenance
and the Vacancy Reduction Program. Prior to becoming
the Authority's only maintenance supervisor, the vacancy
reduction supervisor worked along with the vacancy
reduction crew. The Maintenance Supervisor
acknowledged that productivity had slowed down in the
vacancy reduction work after his promotion.
The Executive Director said he felt the Authority was
keeping up with its schedule and some of the delays were
probably caused by an inefficient start-up process. We
believe the size of the Authority's vacancy reduction
maintenance staff was not sufficient to meet the workload,
which resulted in units not being repaired timely during the
14 months that has expired on the grant. The Authority has
7 months to complete the remaining 184 units. Based upon
the length of time it took the Authority to complete 51 units,
we believe the Authority will not meet its goal of
completing 235 units by December 1996 unless it contracts
out some of the work and HUD approves all of the
Authority's Vacancy Reduction Plan revisions.
The Authority did not request the necessary Vacancy Plan
The Authority Did Not
revisions from HUD for its Vacancy Reduction Program
Submit Vacancy
grant. The Executive Director said the Authority was in the
Reduction Plan Revisions
process of obtaining HUD's approval to reprogram Vacancy
to HUD As Required
Reduction funds for the disposition of seven units and the
demolition of 28 units. The Authority is required to inform
HUD immediately of any problems, delays, or adverse
conditions which will impair the Authority's ability to
comply with the Vacancy Plan. The Authority has a budget
revision for the disposition of seven units pending at HUD.
The Authority reported the demolition plans in its
December 31, 1995 Vacancy Reduction Program quarterly
report, but the Authority did not request HUD's approval to
demolish the 28 units until March 1996. The approval is
still pending at HUD.
Page 5 96-CH-202-1008
Finding 1
The Executive Director said the Authority completed 78
units under the Lead Based Paint Program. He was under
the impression that the 78 units counted toward the 235
vacancy reduction units to be completed by December
1996. HUD's Central Office Vacancy Reduction Specialist
said the Authority must repair 235 units with the Vacancy
Reduction Program grant funds and cannot substitute other
program funded units to count towards the 235 units to be
completed without HUD's approval. The Authority
submitted a revision to HUD in March 1996 requesting that
funds from the lead based paint units be reprogrammed into
management improvements. HUD's approval of the
revision would allow the Authority to reallocate Vacancy
Reduction Program funds from the repair of the lead based
paint units to Authority wide physical improvements such
as outdoor lighting and playground equipment.
The Authority completed 51 units under the Vacancy
The Authority Did Not
Reduction Program between March 1995 and February
Lease Units In a Timely
1996. The Authority spent $227,577 to complete the units.
Manner
However, the Authority did not lease 37 of the units in a
timely manner. The number of days the units remained
vacant ranged from 31 days to 216 days as follows:
Number of Days Vacant Number Of Units
31 days to 49 days 7
50 days to 99 days 16
100 days or longer 14
On February 29, 1996, seven of the 51 units were still
vacant. Three of the units were vacant for one day; three
were vacant from 61 to 72 days; and the last unit was
vacant 149 days. The Director of Housing said the majority
of the vacant units were designed for handicapped persons
and the units were difficult to lease. She said the Authority
may offer non-handicapped applicants a unit designed for
a handicapped person. However, she must also tell them
that if a handicapped applicant is approved for a unit, the
non-handicapped person may be transferred to another unit.
Most non-handicapped applicants decide to wait for a
standard unit. As of February 29, 1996 13 of the
96-CH-202-1008 Page 6
Finding 1
Authority's 88 housing applicants waiting for approval
indicated they were disabled.
Handbook 7460.7 Rev-1, Field Office Monitoring of Public
Housing Agencies, paragraph 5-2(c) states that the
Authority should complete vacant unit turnaround in an
average of no more than 30 calendar days, but preferably
not more than 10 days.
The Executive Director said in 1995 the vacancy reduction
crew repaired numerous units in short periods of time. He
was aware some units would remain vacant for a short
period of time, but felt the Authority needed to get the units
back on-line.
The Director of Housing said the units were leased as
maintenance informed her of the available units. The
Maintenance Department's Facilities Assistant informs the
Director of Housing when units are ready for occupancy.
The Director of Housing said in the past, the Maintenance
Department did not forward the unit information to her in a
timely manner. She also said some delays occurred because
of delays in processing the housing applications such as
obtaining police reports and income verifications.
The Authority's Housing Assistant is responsible for
handling the majority of the occupancy functions. Due to
the Housing Assistant's workload the applicants were
required to setup an appointment one week after they
initially came to apply for housing. The Housing Assistant
said the process allowed her to schedule time to devote to
the applicant, instead of having them wait for her to finish
other duties before she could assist them. The Housing
Assistant said she processes the applications as quickly as
possible, but that is not her only responsibility. She also
had to prepare and disseminate official notices, prepare
occupancy and other reports, answer telephone calls, route
incoming mail, receive rent payments, and greet visitors to
the Authority. These other duties take up to 33 percent of
her time and prevent her from immediately processing
applications. She said if she had less general
responsibilities, she could begin processing applications
sooner and the application process would be completed
Page 7 96-CH-202-1008
Finding 1
quicker. As a result, the applicants screening and
certification process was lengthy.
Auditee Comments Excerpts from the Executive Director's comments on our
draft findings follows. The complete text of his comments
is included in Appendix A.
The Authority agrees with this finding. The Authority is
currently utilizing increased contract labor for painting and
cleaning of vacant apartments to supplement in-house labor
and a contractor for turnkey unit preparation to increase the
output of units available for rental. HUD's approval of
disposition, demolition, and conversion of some apartments
will further reduce the number of apartments that must be
readied. The Authority believes this approach will allow
Vacancy Reduction Program goals to be met by the end of
the grant period.
The Authority will submit future revisions to the Vacancy
Reduction Plan when appropriate.
The Authority has improved applicant processing to less
than 30 days in most cases. Revised procedures for
improved communication between maintenance and
management staff now in effect will help ensure units are
rented without undue delay after they become available. In
addition, the Authority will continue to implement its
comprehensive marketing strategy in an effort to make sure
there is a sufficient pool of qualified applicants at all times
to whom newly renovated apartments can quickly be
rented.
Recommendations We recommend that the Director of Public Housing, Illinois
State Office, assure that the Rock Island Housing Authority:
1A. Ensures that the proposed contract labor and the
current level of vacancy reduction crew members
are sufficient to meet the goals of the program.
96-CH-202-1008 Page 8
Finding 1
1B. Submits future revisions immediately to HUD
requesting approval for changes in the Vacancy
Reduction Program grant agreement.
1C. Leases units repaired under the Vacancy Reduction
Program within a reasonable length of time.
1D. Maintains ongoing coordination between the
Maintenance and Housing Departments regarding
the status of the units in its Vacancy Reduction
Program.
1E. Strengthens its procedures to ensure that applicants
are approved for housing in a timely manner.
We also recommend that the Director of Public Housing,
Illinois State Office:
1F. Coordinate with the Vacancy Reduction Specialist
in Central Office to assure the Housing Authority's
requested revisions to the Vacancy Reduction
Program grant agreement are reviewed and acted
upon in a timely manner.
Page 9 96-CH-202-1008
Finding 1
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96-CH-202-1008 Page 10
Finding 2
The Authority Did Not Prepare Units For
Occupancy Timely
The Rock Island Housing Authority allowed units to remain vacant for extended periods of time.
The Authority did not prepare and lease its vacant units within 30 calendar days. The Authority
reported in its 1995 Public Housing Management Assessment Program certification that the
annual average turnaround time for vacant unit preparation was 159 days. HUD requires the
Authority to maintain an average turnaround time for vacant units of 30 calendar days, with a
goal of 10 days. The Authority did not adequately use its maintenance staff and lacked sufficient
staffing in its Occupancy Department to meet the 30 calendar days requirement. As a result, the
Authority did not maximize rental income and deprived low-income and elderly individuals of
housing.
Handbook 7460.7 Rev-1, Field Office Monitoring of Public
HUD Requirements
Housing Agencies, paragraph 5-2(c) states that the
Authority should complete vacant unit turnaround in an
average of no more than 30 calendar days, but preferably
not more than 10 days.
The unit turnaround time is also used as an operations
indicator under Handbook 7460.5, Public Housing
Management Assessment Program. Paragraph 6-2 E 10(b)
defines the turnaround time as including the time a unit is
vacated until a new lease is in effect. Under the Assessment
Program, unit turnaround is one of the seven performance
indicators that public housing agencies must certify to
HUD.
The Rock Island Housing Authority allowed units to remain
Excessive Time was
vacant for more than 30 calendar days before the units were
Taken to Prepare and
prepared for occupancy and leased. The Authority certified
Lease Vacant Units
to HUD that for the fiscal year ended September 30, 1995,
the average time used to prepare units for re-rental was 159
days.
We reviewed the vacant unit information for the Authority's
five developments as of February 29, 1996. At that time,
the Authority had 92 vacant units that were not part of the
Page 11 96-CH-202-1008
Finding 2
Vacancy Reduction Program. Of the 92 vacant units, 88
(97 percent) were vacant an average of 321 days, ranging
from 35 to 1,531 days; and four had been vacant less than
30 calendar days. Of the 88 units vacant more than 30
calendar days, the Authority had completed the
maintenance work needed to prepare 12 units for
occupancy. The following table shows the number of days
it took to get its 12 vacant units ready for occupancy and
the total number of days the units were vacant:
Days Days
Date Date Days to Since Vacant as
Uni Vacated Complete Finish Finished of 2/29/96
t d
1 09-30- 12-08-94 434 448 882
2 93 09-14-95 83 168 251
3 06-23- 10-31-95 61 121 182
4 95 01-05-96 189 55 244
5 08-31- 02-28-96 1,387 1 1,388
6 95 02-02-96 422 27 449
7 06-30- 02-23-96 1,525 6 1,531
8 95 12-20-95 426 71 497
9 05-12- 12-29-95 67 62 129
10 92 02-28-96 116 21 137
11 12-07- 02-27-96 459 2 461
12 94 12-28-98 351 63 414
12-20-
91
10-20-
94
10-23-
95
10-15-
95
11-25-
94
01-11-
95
It took from 61 to 1,525 days to complete the maintenance
work on these 12 units. Although the 12 units were in
rentable condition, they remained vacant an additional one
to 448 days after the maintenance work was completed.
The remaining 76 units were not repaired and were vacant
The Authority Took an average of 285 days, ranging from 35 to 861 days.
Excessive Time to
Prepare Vacant Units For The Authority did not prepare vacant units for turnaround
Occupancy in a timely manner. We inspected 30 of the 76 unrepaired
96-CH-202-1008 Page 12
Finding 2
units which were vacant for more than 30 calendar days, to determine the condition of the
units and the estimated time needed to prepare the units for occupancy. The Maintenance
Supervisor accompanied us on the inspections. The units were randomly selected from the
Authority's five developments. The 30 units inspected were vacant from 35 to 861 days.
The Maintenance Supervisor estimated the number of hours
needed to prepare the units for occupancy as follows:
Estimated Number of Hours Number
to Complete of Units
8 Hours or less 4
Between 9 and 40 Hours 11
60 Hours 4
80 Hours 5
Between 100 and 250 Hours 6
The Authority has 13 maintenance employees to prepare
vacant units that were not designated as part of the Vacancy
Reduction Program. However, the Authority did not use its
maintenance staff to their full capacity for preparing vacant
units.
The Assistant Director said the Authority has a maintenance
crew of four employees designated to perform unit
turnaround because it was the most efficient use of their
skill levels. The four employees are assigned to work
specifically on unit turnarounds. Five other maintenance
employees are responsible for work orders and assisting on
the unit turnarounds as their schedules allow. Three other
employees are responsible for cleaning out units. The
remaining employee is responsible for ground maintenance.
The Assistant Director said the maintenance crews only
prepare units that are expected to be occupied in the near
future. The Director of Housing informs her of the type and
quantity of units needed based on her estimate of approved
applicants from the applicant waiting list. However, as of
February 29, 1996, the Authority had 88 applicants for all
types of housing units. Because of delays in processing the
Page 13 96-CH-202-1008
Finding 2
applications only a small number of applicants requiring
housing were approved by the Authority.
The Assistant Director acknowledged that many of the
vacant units only require minor work, but she said the
maintenance crew did not have the time to repair units that
the Director of Housing did not currently need for
occupancy. She said in the near future the Authority will
hire outside contractors to complete such work as painting
and tile replacement which will allow units to be prepared
for occupancy in a more timely manner.
The Authority did not lease its vacant units in a timely
The Authority Took
manner. Once the Authority completed the maintenance
Excessive Time to Lease
work on 12 units, the units remained vacant for an
Vacant Units
excessive amount of time. As of February 29, 1996, the 12
units remained vacant, but ready for occupancy, from one
to 448 days. For example, Unit 3 was ready for occupancy
on October 31, 1995. As of February 29, 1996, the unit
was still vacant. Therefore, the unit has been vacant for 121
days since the Authority completed the maintenance work.
The Director of Housing said the delays in renting the
finished units resulted from delays in processing
applications for housing. The major delays are obtaining
police reports from the City of Rock Island and previous
landlord information.
According to the Authority's February 29, 1996 waiting list
the Authority had 88 applicants who could have filled all 12
units. However, the Director of Housing said the waiting
list did not represent approved housing applicants. It was
a listing of people who applied for housing and are still
being processed and pending approval. Therefore, the
waiting list could not be used to determine if any of the 88
applicants could have actually filled the 12 vacant units.
The HUD Occupancy Standards Handbook, 7465.1 Rev-2
requires a public housing agency to keep waiting lists
organized in a way that easily identifies each applicant's
priority and preferences and the date and time of the
application. The waiting lists also must be easily
reviewable by HUD.
96-CH-202-1008 Page 14
Finding 2
The Authority's Housing Assistant is responsible for
handling the majority of the occupancy functions. The
Housing Assistant maintains an automated waiting list.
However, the list did not contain enough information for
selecting applicants. It did not show whether the applicant
was ready to be housed. An applicant is not ready to be
housed until the Authority receives and approves all
required information such as police reports, credit reports,
and income verifications. The waiting list also ranked
applicants by pre-application date instead of the date the
applicant became eligible.
The Housing Assistant is responsible for accepting
applications for housing, maintaining the applicant waiting
lists, screening applicants, notifying applicants of their
housing status, preparing occupancy reports, and office
receptionist duties. Most housing authority's have more
then one person performing these various duties.
Due to the Housing Assistant's workload the applicants
were required to setup an appointment one week after they
initially came to apply for housing. The Housing Assistant
said the process allowed her to schedule time to devote to
the applicant, instead of having them wait for her to finish
other duties before she could assist them. The Housing
Assistant said she processes the applications as quickly as
possible, but that is not her only responsibility. She also
had to prepare and disseminate official notices, prepare
occupancy and other reports, answer telephone calls, route
incoming mail, receive rent payments, and greet visitors to
the Authority. These other duties take up to 33 percent of
her time and prevent her from immediately processing
applications. She said if she had less general
responsibilities, she could begin processing applications
sooner and the application process would be completed
quicker. As a result, the applicants screening and
certification process was lengthy.
After the required information is received from the
applicant, the information is forwarded to the Director of
Housing for review. The Director of Housing makes the
final decision to offer the applicant an unit. The Director of
Housing said the units remained vacant for long periods of
time because of various delays in processing the
Page 15 96-CH-202-1008
Finding 2
applications for housing, such as obtaining police criminal
reports and previous landlord verifications. She said the
length of the approval process varies for each applicant.
Some people were unwilling to answer requests for
information and the Authority needed to follow up with
second and third requests for information. The Director of
the Housing Authority said that in the past, an applicant
could be on the waiting list as long as 90 days.
Auditee Comments Excerpts from the Executive Director's comments on our
draft findings follows. The complete text of his comments
is included in Appendix A.
The Authority agrees with the finding. The Authority has
implemented a revised procedure which will reduce
combined maintenance and leasing turnaround time for
newly vacated units to the HUD standard of 30 days or less.
Also, an additional employee has been hired to assist with
processing of new applicants. The automated waiting list
has been enhanced so that each applicant's status is more
easily determined.
Management has determined the single most significant
delay is caused by the time it takes to obtain criminal
history checks from the State of Illinois. Alternative means
of obtaining criminal background information are being
utilized to reduce dependence on the State for this critically
important information.
Recommendations We recommend that the Director of Public Housing, Illinois
State Office, assure that the Rock Island Housing Authority:
2A. Establishes procedures and controls to ensure that
average unit turnaround time for vacant units is
brought within acceptable limits.
96-CH-202-1008 Page 16
Finding 2
2B. Redesigns and updates the automated waiting lists to
provide sufficient information to identify an
applicant's status easily.
2C. Performs an analysis of the application, screening,
and certification process to determine where delays
occur and implements procedures to shorten the
process including beginning the processing steps
earlier in the cycle.
Page 17 96-CH-202-1008
Finding 3
The Authority Did Not Adequately Safeguard
Its Inventories
The Rock Island Housing Authority did not adequately safeguard its inventory of parts and
supplies. Specifically, the Authority did not: (1) maintain adequate inventory records of the parts
and supplies; and (2) ensure that warehouse stock was properly safeguarded. The Director of
Administration said the Authority did not have policies and procedures to control its warehouse
inventory system. As a result, HUD has no assurance the warehouse inventory was properly
accounted for or safeguarded against loss, misuse, theft, or waste.
Section 309 of the Annual Contributions Contract requires
Requirements and
Housing Authorities to maintain complete and accurate
Regulations
books of accounts and records. Records must be kept of all
personal property, including an annual inventory of
equipment.
HUD Handbook 7510.1, The Low Rent Accounting
Handbook, Chapter 7, paragraph 5(g) requires local
Authorities to inventory equipment and supplies annually
and compare the inventory results with inventory records.
Housing authority records must be adjusted for any
differences.
The Rock Island Housing Authority did not maintain
Inventory Records Were
adequate inventory records of the parts and supplies stored
Not Properly Maintained
at its warehouse. It did not maintain a perpetual
computerized or manual inventory listing of its parts and
supplies during the year. The Authority conducted an
annual physical inventory count at year end, however, the
physical count was not accurate. During the 1995 physical
count, the Authority failed to account for an entire section
of cleaning supplies. Because the Authority did not
maintain perpetual or periodic inventory records, the error
was not noticed. The supplies not accounted for was later
estimated to be valued at $2,713, approximately 10 percent
of the inventory at the warehouse.
96-CH-202-1008 Page 18
Finding 3
Additionally, the Authority improperly included several
used items such as toilets and lighting fixtures in the year
end inventory count. These items were priced out as new
items and included in the year end inventory total of new
items. The Inventory Manager said she was verbally
instructed to do this by Authority management. However,
Authority management could not explain why they gave
these instructions.
Since inventory records were not maintained, the Inventory
Manager physically examined the parts bins to determine if
certain parts were in stock or if adequate inventories were
maintained. The Inventory Manager said she had general
knowledge of the quantity of popular parts on hand at any
given time. However, if the actual quantity on hand of the
popular parts was different than she estimated, the
difference could not be explained. She had to physically
inspect the supplies that were used only occasionally as she
had little or no knowledge of what to estimate for quantities
on hand. If fire or theft occurred, the Authority could not
estimate with any certainty the value of the loss due to poor
inventory records.
The Authority did not properly safeguard its inventory. The
The Authority Lacked
inventory of parts and supplies maintained at the warehouse
Adequate Physical
were not safeguarded by any type of physical barrier such
Safeguards For Inventory
as a locked inventory cage. The inventory was kept in the
center of the warehouse which allowed all maintenance
personnel full access to the inventory. While there was a
verbal policy prohibiting maintenance personnel from
accessing the inventory, the Inventory Manager
acknowledged that maintenance personnel did have access
to the supplies and parts inventory in the warehouse.
According to the Inventory Manager, although theft of parts
and supplies was not common at the warehouse, it
occasionally occurred.
In a memo dated July 1994, from the Inventory Manager to
the Authority's Assistant Executive Director, the Inventory
Manager said maintenance employees were taking supplies
from the warehouse without her knowledge. Additionally,
the Inventory Manager could not readily determine which
supplies were taken, or the exact quantities missing,
because the Authority had inadequate inventory records.
Page 19 96-CH-202-1008
Finding 3
This lack of control over the supplies resulted in adequate
quantities not being available when needed.
Also, during January 1995, leather work gloves were stolen
from a locked file cabinet in the Inventory Manager's office.
The Inventory Manager said if it was possible to break into
her locked cabinet, the unlocked inventory is also at risk.
Authority officials cited a short term lease as the reason
they did not invest funds to safeguard its inventory through
physical barriers. If the warehouse lease was not renewed,
the funds spent safeguarding the inventory could not be
recouped.
Many warehouse parts bins were not labeled with a part
number or description. If parts were placed in the wrong
bins, the Authority's employees would not notice the error
until the parts were counted or needed for a repair. Also,
parts were stored on the warehouse floor, putting the parts
at risk for loss or physical damage.
The Authority's five project sites maintain approximately a
two week supply of parts required for daily maintenance.
The five project sites stock items such as cleaning,
plumbing, and electrical supplies. The Inventory Manager
said the status of the sites is similar to the warehouse,
because inventory control systems and physical safeguards
are not properly maintained.
As a result of the Authority inadequately safeguarding its
inventory, we were unable to verify that supplies were
actually received and used only for the intended purposes.
The Authority's Director of Administration explained the
The Authority's Lack of
lack of inventory controls as follows: (1) there were no
Written Procedures or
written procedures controlling the warehouse inventory
Policies Resulted in
system for parts and supplies; (2) the Authority did not have
Inadequate Inventory
procedures for properly conducting a year end physical
Controls
count, accounting for inventory, reconciling the physical
count with the book records, or maintaining records of
inventory on hand; (3) the Authority installed a new
computer system two years ago, however, the system does
not have software available to adequately control the
inventory; and (4) the Inventory Manager may lack the
96-CH-202-1008 Page 20
Finding 3
formal training to properly control the inventory. The
Inventory Manager had requested training in the past,
however, the Authority did not respond to the requests. The
Director of Administration said the Authority will pursue
training for the Inventory Manager in the near future.
Additionally, she said the Authority may hire an inventory
consultant to set up an adequate inventory control system.
The Authority recently established a written policy
restricting access to the warehouse inventory to four
individuals, the Inventory Manager, Maintenance
Supervisor, Assistant Director, and the Facilities Assistant.
The current policy carries penalties ranging from written
warnings to termination of employees who do not follow it.
Previously, a verbal policy existed which restricted access
to these individuals, however, the verbal policy was not
enforced.
Auditee Comments Excerpts from the Executive Director's comments on our
draft findings follows. The complete text of his comments
is included in Appendix A.
The Rock Island Housing Authority agrees with the finding.
The Authority established a written procedure to restrict
access to the warehouse to only those employees with
immediate business to conduct. All visitors (including
employees) must log in and out of the building and have
supervisory-approved business to conduct. Additional
procedures are currently under review to restrict access to
the maintenance "shops" located at each development site.
Also, the Authority issued a request for proposal to obtain
a qualified consultant to develop and implement a
comprehensive inventory management system. The request
for proposal requires the consultant to develop formal
procedures, assess the current software's ability to meet the
inventory management need, and provide staff training to
allow for ongoing operation that is in compliance with
HUD requirements and sound management practices.
Page 21 96-CH-202-1008
Finding 3
Recommendations We recommend that the Director of Public Housing, Illinois
State Office, assure that the Rock Island Housing Authority:
3A. Establishes policies and procedures which outline
the proper steps required to control and account for
the inventory. The procedures should include
controlling the inventory through physical
safeguards or barriers such as a locked safety cage.
The policies and procedures should also ensure that
all parts are properly labeled with a part number and
description.
3B. Provides training to its employees for properly
controlling warehouse inventory.
96-CH-202-1008 Page 22
Finding 3
(THIS PAGE LEFT BLANK INTENTIONALLY)
Page 23 96-CH-202-1008
Internal Controls
In planning and performing our audit, we considered the internal controls of the Rock Island
Housing Authority to determine our auditing procedures and not to provide assurance on internal
controls. Internal controls consist of the plan of organization, methods, and procedures adopted
by management to ensure that resource use is consistent with laws, regulations, and policies; that
resources are safeguarded against waste, loss, and misuse; and that reliable data are obtained,
maintained, and fairly disclosed in reports.
We determined the following internal controls were
Relevant Internal
relevant to our audit objectives:
Controls
• Management philosophy and operating style.
• Oversight body.
• Methods of assigning authority.
• Management monitoring methods.
• Completeness of accounting systems.
• Segregation of duties.
• Safeguards over access to and use of assets and records.
• Independent verifications and reconciliations
• Policies and procedures.
We assessed all the relevant controls identified above.
It is a significant weakness if internal controls do not give
Significant Weaknesses
reasonable assurance that resource use is consistent with
laws, regulations, and policies; that resources are
safeguarded against waste, loss, and misuse; and that
reliable data are obtained, maintained, and fairly disclosed
in reports.
96-CH-202-1008 Page 24
Internal Controls
Based on our review, the following items are significant
weaknesses:
• Safeguards over access to and use of assets. The
Authority did not adequately safeguard its inventory
of parts and supplies (see Finding 3).
• Authority policies and procedures. The Authority is
not meeting its established goals for the Vacancy
Reduction Program (see Finding 1) and is not
following its own verbal policies regarding
occupancy (see Finding 2) and inventory (see
Finding 3).
Page 25 96-CH-202-1008
Follow Up On Prior Audits
This is the first OIG audit of the Rock Island Housing Authority.
The Authority's last Single Audit Report was for the Fiscal Year ended September 30, 1994. The
report contained six findings, of which two were repeated from the prior year's audit report.
None of the findings are related to this audit.
Appendix B
Distribution
Secretary's Representative, Midwest
Director, Office of Public Housing, Illinois State Office (2)
Assistant General Counsel for the Midwest
Field Controller, Midwest
Public Affairs Officer, Midwest
Director, Accounting Division, Midwest
Assistant to the Deputy Secretary for Field Management, SC
(Room 7106)
Comptroller/Audit Liaison Officer, PF (Room 4122) (3)
Acquisition Librarian, Library, AS (Room 8141)
Chief Financial Officer, F (Room 10166)(2)
Deputy Chief Financial Officer for Operations, FO (Room 10166)(2)
Director, General Management Division, PMG, (Room 4216)
Associate General Counsel, Office of Assisted Housing and Community
Development, GC (Room 8162)
Assistant Director in Charge, U.S. GAO, 820 1st NE, Union Plaza
Bldg. 2, Suite 150, Washington, D.C. 20002
96-CH-202-1008 Page 26
Rock Island HA, Rock Island, IL
Published by the Department of Housing and Urban Development, Office of Inspector General on 1996-05-23.
Below is a raw (and likely hideous) rendition of the original report. (PDF)