Issue Date
June 21, 1996
Audit Case Number
96-NY-201-1002
TO: Harry A. Reese, Director, Office of Public Housing
Buffalo Area Office
FROM: A. Paul Kane, District Inspector General for Audit
New York/New Jersey
SUBJECT: Buffalo Municipal Housing Authority
Low-Rent Housing Programs
Buffalo, New York
We conducted an audit of the Buffalo Municipal Housing Authority of the City of Buffalo, New
York (hereafter referred to as the BMHA) pertaining to its Low-Rent Housing programs. The
purpose of the audit was to determine whether the BMHA is:
• providing tenants with decent, safe and sanitary units that meet mandatory minimum
Housing Quality Standards (HQS) prescribed by the U.S. Department of Housing and
Urban Development (HUD);
• complying with the terms and conditions of its Annual Contributions Contract (ACC),
applicable laws, HUD regulations, and other applicable directives; and
• managing its programs and operations effectively, efficiently, and economically.
Our audit disclosed that the BMHA is generally providing tenants with decent, safe and sanitary
units; and is generally complying with the terms and conditions of its ACC. However, the review
also disclosed that various improvements are needed in its operations to enhance effectiveness,
increase efficiency, and promote better economy. Specifically, our audit results disclosed that
the BMHA should improve its: management information systems, maintenance operations,
controls over inventories, unit vacancy rate, cash management procedures and investment
practices, controls over staffing levels, travel and personnel practices, and the system used to
process purchase orders. Also, the BMHA should improve the accuracy of its Public Housing
Management Assessment Program (PHMAP) Certification, and execute an employment contract
with each employee appointed by the Board of Commissioners to reduce the possibility of
litigation if termination occurs.
Within 60 days, please give us for each recommendation made in the report, a status report on:
Management Memorandum
(1) the corrective action taken; (2) the proposed corrective action and the date to be completed;
or (3) why action is not considered necessary. Also, please furnish us copies of any
correspondence or directives issued related to the audit.
Should you or your staff have any questions, please contact Alexander C. Malloy, Assistant
District Inspector General for Audit at (212) 264-8000, extension 3976.
96-NY-201-1002 Page ii
Executive Summary
We conducted an audit of the Buffalo Municipal Housing Authority (herein referred to as the
BMHA) pertaining to its Low-Rent Housing programs. The objective of the audit was to
determine whether the BMHA is:
• providing tenants with decent, safe and sanitary units that meet HUD's mandatory
minimum HQS;
• complying with the terms and conditions of its Annual Contributions Contract (ACC),
applicable laws, HUD regulations, and other applicable directives; and
• managing its programs and operations effectively, efficiently, and economically.
Our review disclosed that the BMHA is generally providing tenants with decent, safe, and
sanitary units; and is generally complying with the conditions of its ACC, applicable laws, HUD
regulations, and other directives. However, the audit also disclosed that improvements are
needed in the BMHA's operations to enhance effectiveness, increase efficiency, and promote
better economy. In order to accomplish this, the BMHA needs to take the necessary actions to
correct the deficiencies noted during our audit, which are summarized below and described in the
findings of this report.
The BMHA's management information systems do not
BMHA's management provided accurate, reliable and timely information. We
information systems do attribute this weakness to the lack of a centralized computer
not provide accurate, system, as well as, the absence of adequate expertise to
reliable and timely properly manage its current information systems. As a
information result, BMHA employees, including top management, do
not have accurate and current information readily available
to assist in making sound decision on how and where scarce
resources are to be used.
The BMHA's maintenance operations lack: (a) a reliable
BMHA's maintenance
and effective maintenance information system; (b)
structure does not
maintenance performance standards for its maintenance
adequately provide for
employees; and (c) adequate management oversight. As a
proper staff account-
result, the current maintenance structure does not
ability and productivity
adequately provide for proper staff accountability and
productivity.
Page iii 95-NY-201-1002
Executive Summary
The BMHA's controls over inventories are not adequate
BMHA's controls over
enough to properly safeguard its materials, supplies, and
inventories are not
equipment. We found that inventory records were not
adequate
accurate and that inventory policies were not applied
consistently or in compliance with HUD guidelines. Also,
we noted that items were missing, stolen, and/or used for
unauthorized purposes and that the supply inventory was
not valued consistent with HUD guidelines. As a
consequence, the BMHA does not have adequate assurance
that items in its inventories are properly accounted for and
correctly valued; or that adequate internal controls are in
place to promptly detect theft or misuse. We attribute these
weaknesses to a lack of: (a) managerial oversight, (b) an
authority-wide inventory policy, and (c) a reliable inventory
costing system.
The BMHA's unit vacancy rate has consistently exceeded
BMHA's unit vacancy
20 percent. The high rate is attributable to the BMHA's
rate has consistently
failure to perform unit turnaround activities timely, which
exceeded 20 percent
includes: (a) offering vacant units to applicants, (b)
preparing vacant units for reoccupancy, and (c) executing
leases with prospective tenants. Additionally, we believe
that the number of units designated for the elderly or
disabled may be greater than the actual need; and is
therefore having a negative impact on the BMHA's vacancy
rate. As a result, the housing needs of certain low-income
applicants are not being met promptly.
The BMHA's controls over cash management practices are
BMHA did not invest its
not adequate. Specifically, we noted that the BMHA did
excess funds
not invest its excess funds; failed to periodically solicit or
evaluate its banking services; and improperly advanced
operating funds of Federal programs to pay costs incurred
under non-Federal programs. As a result, no investment
income was earned, banking services may not be adequate,
and Federal funds were improperly advanced to pay costs
incurred under non-Federal programs. We believe that
these conditions occurred because the BMHA procedures
in the areas of investing, banking, and requesting funds
from the City of Buffalo were not adequate.
BMHA's staff levels The BMHA's staffing levels exceed HUD's suggested
exceed HUD's suggested levels; some of its staff is not being adequately utilized; and
levels its controls over overtime and travel are not adequate.
95-NY-201-1002 Page iv
Executive Summary
Additionally, the BMHA's Commissioners are receiving compensation in breach of the ACC.
We attributed these deficiencies to management's failure to evaluate staffing levels, the lack
of a formal written personnel policy, inadequate controls over certain aspects of travel and
overtime, and insufficient oversight by management. As a result, the BMHA cannot assure
HUD that all staffing, overtime, and travel costs are necessary and reasonable to the
operations of the projects. Regarding the unauthorized payments of compensation to the
Commissioners, this resulted in ineligible expenses of $32,825.
The BMHA's current purchase order system is cumbersome
BMHA's purchase order
and time consuming. As a result, more staff time than
system is cumbersome
should be required is used to process purchase orders. This
and time consuming
deficiency occurred because the BMHA does not have a
uniform purchase order system in place to process purchase
orders timely.
The BMHA's Public Housing Management Assessment
BMHA's PHMAP
Program (PHMAP) Certification; as submitted to HUD, for
Certification contain
Fiscal Year Ending June 30, 1994, contains various
conclusions that were
conclusions that were based on inaccurate information and
based on inaccurate
data. The erroneous conclusions resulted from incorrect
information and data
calculations of some indicators; the use of improper
procedures in computing the scores of indicators; and the
BMHA's failure to assure that computer generated data was
accurate.
The BMHA charged the entire cost associated with
BMHA charged the
settlement payments to terminated employees, whose
Federal program the
responsibilities included oversight duties over all BMHA
entire amount paid to
programs, to the Federal program. It is the BMHA's
terminated employees
position that the settlement payments were made to avoid
litigation, which we attribute to the lack of employment
contracts containing termination terms. Consequently, the
BMHA incurred and charged a total of $92,214 to the
Federal program in connection with the termination of three
employees. Since the employees duties also included
management oversight over State funded programs, we
believe that the $92,214 should have been allocated among
all programs administered by the BMHA.
As part of each finding, we recommended certain
Recommendations
improvements that will assist in eliminating the deficiencies
discussed in the finding and will strengthen BMHA's
administration of its Low-Rent Housing programs.
Page v 95-NY-201-1002
Executive Summary
The results of the audit were discussed with BMHA
Exit Conference
officials during the course of the audit and at an exit
conference held on April 9, 1996, attended by:
Buffalo Municipal Housing Authority
Sharon West, Executive Director
Modesto Candelario, Chairperson,
Board of Commissioners
James F. Lagona, Assistant Legal Counsel
Buffalo Area Office - Office of Public Housing (OPH)
Harry Reese, Director, OPH
Joan Spilman, Director, Management, OPH
John E. Lollis, Director, Financial Management, OPH
Ken O'Connor, Engineer, OPH
Joe Raimond, Engineer, OPH
Ron Cianciosi, Financial Analyst, OPH
Office of Inspector General (OIG)
Alexander C. Malloy, Assistant District
Inspector General for Audit
Garry D. Clugston, Senior Auditor
Theresa Semanek, Auditor
Patrick Anthony, Auditor
The BMHA agreed with some of the deficiencies mentioned
in the findings and disagreed with others. We summarized
the BMHA's response, and provided appropriate portions of
our summarization after each finding. Where appropriate,
we have prepared an evaluation of the BMHA's comments.
95-NY-201-1002 Page vi
Table of Contents
Management Memorandum i
Executive Summary iii
Introduction 1
Findings
1 The BMHA Needs a Reliable Comprehensive
Management Information System 3
2 The BMHA Needs to Ensure That Its Maintenance
Operations are Efficient and Economical 7
3 The Controls Over Inventories Need
Strengthening 15
4 The BMHA's Unit Vacancy Rate Needs to
be Reduced 25
5 The BMHA Needs to Improve Cash
Management Procedures 35
6 The BMHA Needs to Improve Personnel
Practices 39
7 The BMHA Needs to Implement a Uniform
System to Process Purchase Orders 47
8 The Accuracy of the PHMAP Certification is
Page vii 96-NY-201-1002
Table of Contents
Questionable 51
9 Settlement Cost Should Have Been Allocated
Among all Programs 57
Other Matters 61
Internal Controls 63
Follow Up On Prior Audits 65
Appendices
A Distribution 67
Abbreviations
ACC Annual Contributions Contract
AIT Advanced Integrated Technology
BMHA Buffalo Municipal Housing Authority
HUD U.S. Department of Housing and Urban Development
HQS Housing Quality Standards
MCS Maintenance Costing System
MIS Management Information System
MOA Memorandum of Agreement
OIG Office of Inspector General
OPH Office of Public Housing
PHMAP Public Housing Management Assessment Program
RFP Request for Proposal
VAPC Vacant Apartment Preparation Crew
96-NY-201-1002 Page viii
Introduction
The Buffalo Municipal Housing Authority (BMHA) was established in 1934 to provide decent,
safe and sanity housing for eligible low and moderate income families in the City of Buffalo.
The BMHA administers 25 federally funded projects, with 5,042 public housing units and 2
active state funded projects, containing 973 units .
The BMHA is governed by a Board of Commissioners (the
Governing body
Board) composed of seven members; five are appointed by
the Mayor and two are elected by the tenant population.
The Chairperson of the Board is Modesto Candelario. At
the start of our audit the Executive Director of the BMHA
was Michael Clarke. On July 31, 1995, Sharon West was
appointed Executive Director by the Board. The Executive
Director, whose office is located at 300 Perry Street,
Buffalo, New York , is responsible for the day to day
operations of the BMHA. The BMHA's financial records
and books are maintained primarily at its central office
located at 300 Perry Street.
For the Fiscal Year Ended June 30, 1991, the BMHA's
A MOA between HUD
PHMAP scores was 48.8 percent, resulting in the BMHA
and the BMHA was
being designated a troubled public housing authority by
executed
HUD. Because of the low PHMAP score, a Memorandum
of Agreement (MOA) between HUD and the BMHA was
executed in July, 1992, which resulted in the establishment
of baseline data in key performance areas and annual
performance standards. After the completion of the MOA,
in March 1993, the BMHA submitted an Improvement
Plan to HUD in response to its June 1992 PHMAP
evaluation. The Improvement Plan contained tasks and
performance targets for the PHMAP indicators with scores
below a grade C. The BMHA's PHMAP score increased
from 48 percent in 1991 to 70 percent in 1994, which was
high enough for HUD to remove the BMHA from its list of
troubled public housing authorities.
In April 1989, HUD found that the BMHA's tenant
Occupancy problems
assignment practices violated regulations of Title VI of the
Civil Rights Act of 1964, as amended. On December 4,
1989, the BMHA and HUD were name in a lawsuit
concerning the Title VI requirements. In 1992 HUD and
Page 1 96-NY-201-1002
Introduction
the BMHA signed a Voluntary Compliance Agreement
designed to bring the BMHA into compliance with the Title
VI regulations. Our review disclosed that the BMHA is
generally complying with terms of the agreement.
The BMHA received operating subsidies during our audit
Operating subsidies
period from HUD, as follows:
received from HUD
Fiscal Year HUD Operating Subsidies
1993 $12,942,801
1994 13,626,480
The primary objectives of the audit were to determine
Audit Objectives
whether the BMHA is:
• providing tenants with decent, safe and sanitary units
that meet HUD's mandatory minimum HQS;
• complying with terms and conditions of its ACC,
applicable laws, HUD regulations and other applicable
directives that were in effect during our audit period;
and
• managing its programs and operations effectively,
efficiently, and economically.
Our audit field work was performed between January 1995
Audit Period
and September 1995 and covered the period from July 1,
1993 to December 31, 1994. However, activity prior and
subsequent to this period was reviewed when appropriate.
Audit procedures included an examination of the books,
Scope
records and files of the BMHA, files maintained by HUD,
interviews with members of the BMHA and HUD staffs,
and project site visits. Furthermore, we reviewed, the
BMHA's organizational structure, polices, and procedures
for managing its operations. Performed detailed audit
testing, which was based primarily on judgementally
selected samples of the transactions in the areas reviewed.
We conducted the audit in accordance with generally
accepted government audit standards.
96-NY-201-1002 Page 2
Introduction
A copy of this audit report was provided to the BMHA.
Page 3 96-NY-201-1002
Finding 1
The BMHA Needs a Reliable Comprehensive
Management Information System
The BMHA's management information systems is fragmented among various departments and
is not providing top management with current and accurate information to assist in making sound
decisions on how and where scarce resources should be used. As a result, we found that the
BMHA is unable to: (a) measure the productivity levels of its staff in a timely manner; (b) readily
determine whether its various components are operating in a efficient and economical manner;
or (c) properly safeguard and protect resources, such as equipment, material and supplies from
theft or improper use. We attribute this deficiency to the absence of a reliable centralized
management information system that consolidates departmental information into a form usable
by employees and management for operational as well as decision making purposes.
The Annual Contributions Contract (ACC) requires PHAs
Criteria
to adopt necessary procedures to ensure that operations are
run economically and efficiently. In order to accomplish
this, PHAs should have a efficient management information
system to record, track and consolidate data in a form
usable by management.
Our review of the PHA's management information systems
Scope
was an ongoing process during the audit. The review
included examinations and observations of the systems used
by the BMHA to record financial transactions, track work
orders, work performed by the maintenance staff,
nonexpendable equipment, and inventories of materials and
supplies.
Our review disclosed that the BMHA does not have a
The BMHA does not
reliable centralized computer system. Instead, each
have a reliable computer
department developed its own computerized system, which
system
in most cases, are not being adequately maintained. For
example, the maintenance work order database system
contains a substantial amount of inaccurate, unreliable, and
unnecessary data. Also, the system lacks adequate security,
and in many cases can not produce information in a form
Page 3 96-NY-201-1002
Finding 1
usable by employees and top management (See Finding 2).
Furthermore, we found that inventory records are
maintained on several different computer systems, and have
not been reconciled. The data contains errors,
misclassifications, and improper cost valuations. Moreover,
the systems are not capable of providing a total inventory
listing or usage reports. (Finding 3).
Regarding the BMHA's computerized accounting system,
BMHA is using computer
we found that the system listed charges from prior years to
programs that are
purchasing contract accounts when no charges had been put
outdated and very time
into the systems. Also, we noted that accounting functions,
consuming
such as payroll require information to be manually
transferred from one computer system to another. To
accomplish the transfers, some accounting staff members
have two different computer work stations on their desk.
Overall, our review disclosed that the BMHA is using
computer programs that are outdated and very time
consuming; and that many staff members lack adequate
expertise in computer operations and programming.
In our opinion, the lack of a reliable comprehensive
BMHA needs to
management information system precluded top
implement a reliable
management officials from having accurate, complete, and
comprehensive
timely data on the BMHA's various operations, especially
management information
its maintenance and related components. Consequently, the
system
BMHA lacks evidential assurance that its personnel was
effectively and fully utilized; that its equipment, materials
and supplies were adequately protected and properly used;
and that its activities were carried out in an effective,
efficient and economical manner. In this regard, the
BMHA needs to implement a reliable comprehensive
management information system and ensure that its staff
has the ability to manage and use the system.
Auditee Comments The BMHA response provides that the BMHA is utilizing
a Data General and AS400 hardware system. The software
system is Advanced Integrated Technology (AIT). The
current computer system is insufficient to manage and
monitor the comprehensive operation of the Authority and
has caused tremendous difficulties in operating the
programs in several departments of the BMHA.
96-NY-201-1002 Page 4
Finding 1
In December, 1995, as part of the BMHA reorganization, a
Management Information System (MIS) Division was
established with a new MIS Director and Computer
Programmer positions. Top management of the BMHA
believes that the addition of these positions will have direct
and immediate impact upon the capacity of the Authority to
address many of the problems found with the current
computer system. Moreover, BMHA officials will evaluate
and install new software to assist in overcoming current
problems. BMHA officials are currently working with the
Buffalo Civil Service Commission to fill these positions. It
is the BMHA's goal to solve the MIS problems within the
next two years.
The BMHA will enter into a contract in May 1996 with Erie
Community College to train its personnel on effective PC
use in a Windows environment.
Moreover, once the MIS Director and computer
programmer are on board, the BMHA will develop the in-
house capacity to train on the AIT and other software.
Recommendations We recommend that your office ensure that the BMHA:
1A. Perform a full evaluation of its computer hardware,
software, and programming needs; and implement
a comprehensive management information system
that meets the needs of the BMHA.
1B. Evaluate and train personnel to ensure that they
have the necessary skills to use and maintain a
reliable management information system.
Page 5 96-NY-201-1002
Finding 1
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96-NY-201-1002 Page 6
Finding 2
The BMHA Needs to Ensure That Its
Maintenance Operations are Efficient and
Economical
The maintenance operations at the BMHA are not being carried out in a manner that adequately
promotes efficiency and economy. This is occurring because the BMHA's maintenance
operations lack: (a) a reliable and effective maintenance information system that accounts for
work performed by the maintenance staff; (b) performance standards and productivity levels for
its maintenance employees; and (c) adequate management oversight. Consequently, we found
strong indications which show that staff resources are not properly accounted for nor fully
utilized.
The National Housing Act of 1937, as amended, requires
Criteria
each authority to establish sound management practices in
the operations of its projects, including the formulation and
implementation of satisfactory project maintenance
standards. In addition, Section 201 of the ACC requires
that the local authority at all times operate each project for
the purpose of providing safe and sanitary dwellings in such
a manner as to promote efficiency and economy.
a) Maintenance information system is not reliable
The Accuracy and
To evaluate the reliability of BMHA's maintenance
reliability of the work
information system, we obtained data for the two week
order database is
period ended July 30, 1994, which consisted of 11,179
questionable
work order records. Those records disclosed significant
problems with the BMHA's computerized work order
system. First, from the sample of 11,179 records, we
determined that 7,002 of the records reflected either
employee numbers that do not exist or data unrelated to
work performed by the maintenance staff. Also, the system
generated information concerning time and cost that was
not consistent with the data on individual work order
records. BMHA maintenance personnel were unable to
explain how the information got into the system or why the
data did not agree with the individual records. Thus, the
Page 7 96-NY-201-1002
Finding 2
accuracy and reliability of the work order database is
questionable.
We were informed that the work order database system
Inquiries are very
generated more than 500,000 records in just over two years
difficult and time
of operation. The large number of records can be partly
consuming
attributed to records that do not represent actual work
performed. Moreover, we found that a lot of the records
pertain to work orders that were not related to maintenance
assignments. They included work orders for material
ordered for the inventory, inspections, and maintenance of
the general grounds. Since the system has to examine all
available records to find requested data, it is difficult and
very time consuming to perform inquiries.
b) Maintenance performance standards and productivity
levels have not been established
The BMHA lacks performance standards to measure the
No uniform method to
performance of its maintenance staff. These standards
monitor and evaluate
would consist of a description of the various maintenance
maintenance staff
and repair items performed by the maintenance staff with
productivity
expected completion times. Additionally, the BMHA does
not have an adequate process to measure the productivity
levels of its maintenance staff. As a result, the BMHA does
not have adequate assurance that its maintenance staff is
productive and its maintenance operating costs are
economical.
As discussed in Finding 6, the BMHA exceeds the guidance
Maintenance staff
provided by HUD of one maintenance employee for every
exceeds national average
forty units. Currently, the BMHA has one maintenance
employee for every twenty-two available units. Using
HUD's staffing guidelines, we determined that the BMHA
has 103 more maintenance employees than suggested by
HUD guidelines. To evaluate the efficiency of the BMHA's
maintenance staff, we judgmentally selected and analyzed
various completed work orders.
First, we selected the months of July 1994 and March 1995
Average work orders
to determine the average number of work orders completed
completed daily ranged
daily. We focussed on the mechanics, laborers, and
from .95 to 7.17
tradesmen in Technical Operations since they performed
96-NY-201-1002 Page 8
Finding 2
most of the maintenance work tracked by work orders. From available data, we determined
that the average number of work orders completed daily for the selected two months ranged
from .95 for plasterers to 7.17 for the mechanics/laborers. The following table shows the
average number of work orders completed daily by job classification during the two months
selected:
Average
Job Classification Numbers of
by Group Work Orders
Completed
Daily
PLASTERERS 0.95
PAINTERS 1.82
CARPENTERS 1.93
NIGHT SHIFT 2.09
PLUMBERS 2.55
ELECTRICIANS 2.62
EXTERMINATORS 3.14
GLAZIERS 3.14
PMI CREW 3.51
MECHANICS/LABORER 4.28
S - LAKEVIEW
MECHANICS/LABORER 5.65
S - SHAFFER VILLAGE
MECHANICS/LABORER 6.03
S -COMMODORE
PERRY
MECHANICS/LABORER 7.17
S -KENFIELD
Second, we determined the amount of hours charged on
Only 3 of the job
completed work orders for each group for the period from
classifications had 50
July 17, 1994, through July 30, 1994 and classified that
percent or more of its
time as productive time. The time that was not accounted
time charged to work
for on a work order was classified as unproductive. In this
orders
regard, we determined each group's percentage of
productive time by taking the amount of hours charged on
Page 9 96-NY-201-1002
Finding 2
completed work orders and dividing them by total hours
worked during the period. As such, we determined that
only 3 of the 13 groups had 50 percent or more of their time
charged on work orders. The following graph shows the
amount of productive time for each group:
Additionally, we combined the amount of productive time
for all groups. For the sample period, 3,728 hours were
charged as worked; however, only 1,551 hours were
reflected on work orders. Thus, 2,177 hours representing
over 58 percent of the maintenance hours worked can not
be accounted for and is being classified as unproductive
time. The following graph compares the productive time to
the unproductive time:
96-NY-201-1002 Page 10
Finding 2
The low number of completed work orders and the
BMHA needs to develop
amount of unproductive time indicates that the BMHA's
performance and
maintenance operation is not efficient. The BMHA needs
productivity standards
to account for the total time each maintenance employee
is on duty. In doing so, the BMHA should develop and
implement performance standards for common work tasks
and routine repairs. This will allow the BMHA to: 1)
account for the on duty hours of each maintenance staff,
and 2) evaluate the productivity of individual
maintenance employees. Furthermore, performance
standards will provide the maintenance staff with the
measurable level of productivity expected of them.
c) Management oversight is inadequate
The lack of a reliable and effective maintenance
BMHA's management
information system, which would include performance
oversight is weak
standards and productivity levels for its maintenance staff,
has significantly weakened the BMHA's ability to
adequately perform oversight duties and evaluations of its
maintenance operations. Without such a system,
management is unable to determine and document whether
its maintenance staff is productive or whether its
maintenance functions are being performed in an efficient
Page 11 96-NY-201-1002
Finding 2
and economical manner. To accomplish this, we believe
that management may need to obtain consultant services to
assist in: (1) implementing a reliable maintenance
information system; (2) determining whether its
maintenance functions are being performed in an efficient
and economical manner; and (3) evaluating staffing
needs and determining whether it would be more cost
beneficial to privatize some of the maintenance functions.
Auditee Comments The BMHA's response states "We are aware of many of the
problems that the reviewer indicated. At the time of the
review, it was explained, that this was the first full year on
the system. Many problems occurred in: 1. training the
staff, and 2. getting the staff to accept and work with the
system because of the many human errors that occurred.
There are also problems in locking out staff so that they
could only view and not change anything in the system.
Now only supervisors have this ability. Many of the
problems that were indicated were part of our $100,000
contract with AIT which was entered into on September 30,
1994. Since that time the company went out of business
leaving us without corrections to our problems. Since then
SSC, a consortium of Housing Authorities using the same
system has been formed in a attempt to rectify the
problems. We have also made arrangements with Ms. Judy
Lewis of the Syracuse Housing Authority, who was one of
the original developers of the system, who will visit the
BMHA in April 1996 to assist us in solving our computer
problems."
The BMHA's response also provides that the main issue in
this finding is that the BMHA does not have established
Performance Standards and Productivity levels.
Management of the BMHA agrees with the reviewer on this
issue. In order to establish these standards and levels, the
BMHA has allocated monies in the 96 CGP for outside
assistance by 12/97 in establishing these performance
standards and productivity levels. Once these are
established, the BMHA will be able to determine if staffing
should remain the same, be reallocated and/or reduced. The
results of this could also supply the BMHA with a basis for
making any decisions concerning privatization. Any work
96-NY-201-1002 Page 12
Finding 2
done on establishing standards, levels or privatization will
have to be fully discussed and receive support from the
Unions.
Recommendations We recommend that your office ensure that the BMHA:
2A. Take steps to evaluate and correct the current
computerized maintenance information system, so
that:
• The system can be relied upon to provide accurate
and reliable information.
• Data can be extracted timely from the system to aide
in management decisions.
• Obtain adequate technical assistance for the system
either in house or from outside consultants.
2B. Establish performance standards for maintenance
tasks so that the maintenance staff is knowledgeable
of the productivity levels that are expected of them
by management.
2C. Evaluate, after performance standards, are in place,
the productivity of the maintenance staff to
determine whether staffing needs to remain the
same, be reallocated and/or reduced.
2D. Determine whether any maintenance functions
should be privatized.
Page 13 96-NY-201-1002
Finding 2
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96-NY-201-1002 Page 14
Finding 3
The Controls Over Inventories Need
Strengthening
Our review disclosed that the BMHA's inventory controls are not adequate enough to properly
account for and safeguard its inventory of equipment, materials and supplies. Specifically, our
review of nonexpendable equipment inventories disclosed that: a) inventory records are not
maintained properly; b) capitalization and other inventory policies are not in compliance with
HUD guidelines; c) stolen or missing equipment was not written off properly; and d) equipment
belonging to the Federal program is being used at a State project. Regarding the inventory of
materials and supplies, our review disclosed that: a) the inventory level is excessive; b)
reconciliations of differences between the physical inventory and accounting records are not done
properly; and c) items in the inventory were not valued in accordance with HUD guidelines. As
a result, the BMHA does not have adequate assurance that inventories are accurate, accounted
for and properly valued; that inventory levels of materials and supplies on-hand are necessary;
and that internal controls are adequate to promptly detect theft and misuse. We attribute these
weaknesses to the BMHA's lack of adequate controls over inventories and managerial oversight;
to inconsistent authority-wide policies; and to a lack of a reliable inventory costing system.
Specific weaknesses in the BMHA's inventory system are discussed in the following subsections:
(1) NONEXPENDABLE EQUIPMENT INVENTORY
a. Inventory records are not properly maintained
The BMHA's inventory records are not maintained in
Inventory records are not
accordance with HUD requirements. HUD Handbook
maintained in compliance
7510.1, Chapter 7 provides that PHAs shall establish and
with HUD requirements
maintain complete and accurate records of all real and
personal property. Our audit testing disclosed that:
equipment purchases were not properly recorded;
capitalization of equipment was not done in accordance
with HUD requirements; inventory records did not contain
sufficient documentation for equipment identification; asset
identification numbers were not listed on equipment or the
inventory records; and the equipment location, as stated on
the inventory card did not correspond with the actual
location of the equipment. As a result, we could not verify
the existence of various pieces of equipment. We attribute
Page 15 96-NY-201-1002
Finding 3
these problems to record keeping weaknesses in the
BMHA's current inventory system.
Additionally, we found that inventories in the various
Inventories are not
departments of the BMHA are not consistently tracked.
consistently tracked
Specifically, we noted that the Accounting Department
maintains the authority-wide or master inventory records,
which tracks equipment by budget authority. However,
each department tracks its own inventory by either office,
location, or individual item. Consequently, it is very
difficult, if not impossible, to reconcile the departmental
inventory to the BMHA's master inventory.
Furthermore, we found approximately $200,000 in
Items misclassified
misclassified items. Items pertaining to the general
operation and site improvements were classified as
nonexpendable equipment. Examples include: security
systems, software contract services, computer data
conversion services, security consultant services, carpentry
work, door locks, carpeting, and window blinds. Such
misclassifications cause the amount of the inventory to be
grossly overstated which can be misleading if used to
project future inventory needs.
b. Capitalization Policy is not in compliance with HUD
guidelines
The BMHA's inventory capitalization policy does not
Capitalization policy does
comply with the HUD guidelines provided in Handbook
not comply with HUD
7510.1, Chapter 7. At a minimum, the PHA is required to
guidelines
classify ranges, refrigerators, motor vehicles, power
equipment, office furniture, office equipment and similar
items of durable nature as nonexpendable equipment.
Nonexpendable equipment is defined as items of equipment
having a useful life of more than one year. According to
members of the BMHA staff, only equipment with a value
greater than $300.00 is considered nonexpendable
equipment and is capitalized. All equipment, except for
ranges and refrigerators with a value less than $300.00 is
considered expendable and is expended when purchased.
The BMHA capitalization policy does not consider the
useful life of equipment. For example, we found that the
BMHA only capitalized one out of two identical gas
powered line trimmer costing $297.97 for one and $300.00
96-NY-201-1002 Page 16
Finding 3
for the other. Although the equipment was identical, only
the line trimmer costing $300.00 was capitalized. A
BMHA staff member told us that because the cost of one
line trimmer was under $300.00, it was not necessary to
capitalize that equipment. To avoid such inconsistencies in
its capitalization practice, we believe the BMHA should
consider useful life as part of its capitalization policy, as
required by HUD guidelines.
c. Department inventories were not performed or
reconciled with the accounting records
HUD Handbook 7510.1, Chapter 7, Paragraph (5) requires
Equipment inventory not
the PHA to take a physical inventory of all items of
reconciled properly
nonexpendable equipment annually. The differences
between the physical inventory and the accounting records
should be reconciled and all necessary adjustments should
be made. Differences or adjustments must be documented,
reviewed, evaluated, and approved. According to members
of the BMHA staff, each department took an annual
physical inventory of nonexpendable equipment. However,
the physical inventory records have not been reconciled
with the accounting records for our audit period. In
addition, the departmental inventory records were not
reconciled with the master inventory list. Without proper
reconciliations, accounting errors or equipment losses can
not be accurately identified. The physical inventory and
reconciliations are necessary to determine the cause of
inventory losses and reductions, and to provide
management with information necessary to reduce future
losses or errors.
d. Stolen or missing equipment was not written-off
properly
The BMHA has not properly written-off missing and/or
Stolen or missing
stolen equipment. For our audit period, the BMHA deleted
equipment was not
or wrote-off $1,298,000 worth of nonexpendable
written-off properly
equipment, which was approximately 23% of the total
equipment inventory of $5,690,000. Regarding the write-
off, a member of the BMHA staff told us that the housing
authority inventory records had not been updated since
1984; therefore, the BMHA decided to purge and remove
items that were reported missing, stolen, obsolete, or
Page 17 96-NY-201-1002
Finding 3
scrapped from its inventory records. Also, the BMHA
decided to remove the amount of all items costing less than
$300.00. Many of those items were listed as whereabouts
unknown, missing, or stolen.
The BMHA's disposition policy requires that missing,
stolen, or sold inventory be approved by the inventory
survey committee and then removed from the inventory
ledger and accounting records. This policy is not
consistently followed by all departments. Although we
found equipment that was reported stolen in 1990, deletion
memorandums were never approved by the inventory
survey committee. In certain cases, equipment was deleted
from the departmental records, but not removed from the
property ledgers or the master inventory. Consequently, the
departmental records and master inventory are not in
agreement.
e. Equipment belonging to the Federal program is
being used at a State project
The BMHA has not implemented procedures to control and
Equipment belonging to
monitor the use of all equipment. The results of our audit
the Federal program is
testing disclosed that $39,450 of equipment belonging to
being used at a State
the Federal program was assigned to a New York State
project
project. BMHA staff indicated that equipment is often
transferred between projects, on a as needed basis; and if
equipment is permanently transferred to a state project, a
transfer memorandum is sent to the accounting department
so that the state program can be charged for the equipment.
However, we found that although the previous mentioned
equipment has been assigned to a State project; it is still
shown in the Federal program's inventory. In this regard,
the BMHA needs to either justify assigning the equipment
to the State project or execute a transfer memorandum so
that the State project can be charged for using the
equipment in accordance with its procedures.
(2) INVENTORY OF MATERIALS AND SUPPLIES
The BMHA has not According to requirements provided in the ACC, PHAs
managed its inventory of must manage and operate their projects with maximum
materials and supplies efficiency and economy. Our audit disclosed that the
effectively BMHA is not in compliance with this requirement as it
96-NY-201-1002 Page 18
Finding 3
relates to properly managing its inventory of materials and supplies. Specifically, the audit
disclosed that: (a) the inventory level of materials and supplies is excessive; (b) the annual
physical inventory is not reconciled with the general ledger; and (c) the computerized
Maintenance Costing System does not properly value the inventory. Deficiencies noted
during our review are as follows:
a. Inventory level is excessive.
A review of available records disclosed that during Fiscal
Inventory level is
Year 1993, the BMHA had $1,652,825 of materials and
excessive
supplies in its inventory; but only used materials and
supplies valued at $820,309. The review further disclosed
that the same inventory during FY 1994 was $1,722,339,
while usage was valued at $878,720. Based on this
information, the BMHA maintains enough materials and
supplies in its inventory for two years. We believe that
such an inventory level is excessive and expensive to
maintain; and that the material and supply inventory should
be reduced to a level considered reasonable by the BMHA
and HUD management. BMHA officials attributed the
excessive level to obsolete items remaining in the
inventory. However, the officials were unable to provide
evidence that evaluations were performed to determine
which items are obsolete.
b. Annual reconciliations of inventories of materials
and supplies were not supported.
The BMHA performs an annual physical inventory of
Physical inventories of
materials and supplies, as required by HUD Handbook
Materials and supplies
7510.1. However, the physical inventory is not reconciled
were not properly
properly with the accounting records. Chapter 7 of the
reconciled
Handbook provides that the differences between the
physical inventory and the accounting records should be
reconciled and any necessary adjustments should be made.
The 1993 physical inventory amounted to $1,652,824,
whereas, the general ledger balance was $1,904,728. The
1994 physical inventory totaled $1,722,339, while the
general ledger balance was $2,057,389. Rather than
reconciling these differences, the BMHA wrote down the
general ledger balances by $251,904 and $335,050,
respectively, to match the physical count. Without proper
reconciliations, the BMHA can not identify the causes of
the differences to prevent them from recurring in the future.
Page 19 96-NY-201-1002
Finding 3
c. The BMHA does not properly value its inventory
Our audit disclosed several problems with the BMHA's
Inventory not valued
Maintenance Costing System (MCS). The MCS does not
correctly
record inventory values consistent with HUD Handbook
7510.1. Chapter 7, Paragraph (3) of the Handbook provides
that when items of materials are acquired at different dates
and at different prices, such items should be priced on the
"first-in, first-out, average price," or other acceptable
pricing method. The MCS values the inventory at the most
recent or last purchase price, which, in our opinion, is not
an acceptable pricing method because it often artificially
inflates the price of the aged items in the inventory.
Consequently, aged material and supplies are expended at
an inflated price.
In addition, the BMHA's inventory system consists of
numerous warehouses located throughout the BMHA. The
MCS is not programmed to generate an all-inclusive
inventory list. The MCS is limited to an inventory list per
warehouse. Without extensive manually computations, the
BMHA can not easily determine total inventory on-hand.
As a result, additional items may be purchased while in
stock. Also, the MCS does not generate a usage report that
provides the beginning balance, the number of items
purchased, the number of items consumed, and the ending
balance. As a result, the BMHA can not determine which
items are used frequently and which are obsolete.
We consider the weaknesses in the BMHA's controls over
Significant weaknesses in
inventories for equipment, materials and supplies to be
inventory controls
significant. Corrective actions must be taken to implement
controls that will ensure that equipment, materials and
supplies are properly accounted for and safeguarded; and
that purchases of nonexpendable equipment, materials, and
supplies are necessary and reasonable.
Auditee Comments The BMHA's response provides that in the BMHA
reorganization, an independent Inventory Division was
created in the Administrative Department. All inventory
functions from all other departments were integrated within
96-NY-201-1002 Page 20
Finding 3
this division. The director of this division is currently
evaluating various software which will address the
deficiency in the BMHA's current program and include an
inventory tracking program. The BMHA is revising the
purchasing system so that before a purchase order can be
assigned, the inventory department must verify that the
BMHA does not have a sufficient quantity in an effort to
get the inventory levels down.
The BMHA has scheduled an annual physical count of all
equipment to be done concurrent with the annual count of
the materials and supplies inventory by June 30, 1996. In
addition, the new Division of Inventory Control (a division
of Administrative Services) has been formed in order to
facilitate addressing the issues of expendable and non-
expendable inventory. This Division of Inventory, along
with the Audit Division, the Department of Finance and
Budgets as well as the newly created Division of Purchase
will work together to rectify the problems in the area of
inventory and to insure that these problems do not re-occur
in the future.
The Department of Finance and Budgets is working toward
establishing a computerized data base for all non-
expendable inventory items which will replace the manual
card system and which will serve as a basis for proper
inventory classification and reconciliation. Our target date
to complete this task is June 30, 1997.
Since September, 1995, the BMHA is now considering the
useful life of an item in addition to its cost when
determining whether to classify it as expendable or non-
expendable. Additionally, the BMHA will review its
Capitalization Policy and rewrite it as necessary in order to
establish guidelines for the proper classification of
inventory items.
By December 31, 1996, the BMHA's Disposition Policy
will also be reviewed and rewritten in order to establish a
systematic program for the identification and subsequent
removal of obsolete items from the materials and supplies
and the non-expendable equipment inventories. This
process should allow the BMHA to attain an accurate
assessment of its "useable" inventory by creating a uniform
Page 21 96-NY-201-1002
Finding 3
approach to writing-off obsolete and missing and/or stolen
items.
The software which the BMHA currently uses for inventory
valuation has not lived up to its expectations and therefore
does not provide the necessary tools to properly value the
BMHA's inventory. The BMHA is currently in the process
of evaluating new software in many different areas,
including inventory. Officials of the BMHA anticipate
selecting new software by July 1, 1997. Hopefully, this will
result in the procurement of software which will adequately
address the issues of inventory valuation and the subsequent
expensing of the same. To date the BMHA has identified
and removed $27,589 of obsolete items out of its inventory.
The BMHA is planning to remove items on a semi-annual
basis.
Finally, the finding addressed the issue of equipment
belonging to the Federal program being used by the State
program. It is true that federally purchased equipment is
used by the State program on an as needed basis, however,
it is also true that equipment purchased by the state program
is used by the Federal program on an as needed basis.
However, the BMHA does recognize that equipment
permanently transferred from one program to the other
should be transferred to the appropriate property ledger and
charged to that program. This should be addressed in the
procedures manual currently being designed authority-wide.
A cohesive effort between Finance, Purchasing, Audit and
Inventory Control will provide effective procedures with
appropriate controls.
Recommendations We recommend that you ensure that the BMHA:
3A. Perform physical inventories of all equipment,
materials and supplies, and reconcile the results with
appropriate accounting records.
3B . Consider the useful life of an item in its decision to
capitalize its cost.
3C. Identify and remove all obsolete items from the
inventory; and develop and submit a plan to HUD
96-NY-201-1002 Page 22
Finding 3
outlining steps that will be taken to reduce the
materials and supplies inventory to a reasonable
level.
3D. Use a Maintenance Costing System that values
items in the inventory using an acceptable pricing
method and produces useful inventory reports.
Page 23 96-NY-201-1002
Finding 3
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96-NY-201-1002 Page 24
Finding 4
The BMHA’s Unit Vacancy Rate Needs to be
Reduced
The vacancy rate at the BMHA increased to the extent that at December 31, 1994, it had
exceeded 20 percent. The high rate is attributable to the BMHA's failure to perform unit
turnaround activities timely, which includes: (a) offering vacant units to applicants, (b) preparing
vacant units for reoccupancy, and (c) executing leases with prospective tenants. Additionally,
we believe that the number of units designated for the elderly or disabled may be greater than the
actual need; and is therefore having a negative impact on the BMHA's vacancy rate. As a result,
the housing needs of certain low-income applicants are not being met promptly.
Duri
Background n g
the
past
three years the vacancy rate at the
BMHA increased from 25 percent to
34 percent. Specifically, the number
of vacant units escalated from 1,249
in 1992, to 1,705 at December 31,
1994, as shown in the graph below:
Page 25 96-NY-201-1002
Finding 4
Unit turnaround activities are not performed timely
Section 201 of the BMHA's Annual Contribution Contract
PHAs are to complete (ACC) specifies that the Authority must operate the projects
vacant unit turnaround solely for the purpose of providing decent, safe and sanitary
activities on the average dwellings. In connection with accomplishing this objective,
of 30 days Paragraph 5.2.c. of HUD Handbook 7460.7 REV-1, Field
Office Monitoring of Public Housing Agencies requires
PHAs to complete vacant unit turnaround activities on an
average of no more than 30 calendar days.
For Fiscal Year Ended June 30, 1994, BMHA's records
Unit Turnaround time is show that its unit turnaround time averaged 317 days,
extremely excessive which is extremely excessive when compared to the 30 day
requirement by HUD. Additionally, the results of our
review, which consisted of a sample of 22 units, showed
that it took the BMHA an average of 386 days to
turnaround a unit during our audit period. A breakdown of
the 386 days showed that from move-out to the time a unit
was assigned to the Vacant Apartment Preparation Crew
(VAPC) it took an average of 235 days. Also, it showed
that the VAPC took an average of 45 days to prepare the
units for reoccupancy. Additionally, the results showed that
it took an average of 106 days from the date a unit was
ready for occupancy to the date it was leased. In our
opinion, the above mentioned averages are excessive and
have caused units to remain vacant for extensive periods of
time, while unit turnaround activities are slowly completed.
Specific unit turnaround activities that are not being
completed timely are having a negative impact on the
BMHA's vacancy rate, as discussed in the subsections
below.
a) The HUD prescribed system for offering units is
It took an average of having a negative impact on the vacancy rate
235 days for a unit to
become accepted by an Under the BMHA's tenant selection process, a unit is
applicant offered and accepted by an applicant before it is turned over
96-NY-201-1002 Page 26
Finding 4
to the VAPC to perform all necessary repairs. As previously stated, the results of our sample
showed that it took an average of 235 days for a unit to become accepted by an applicant and
turned over to VAPC. We attribute the extremely long period between a unit becoming
vacant and being turned over to the VAPC to the plan (HUD's Plan B) used by the BMHA
to offer units to applicants.
Under HUD's Plan B, which is outlined in Public Housing
An applicant is offered Occupancy Handbook 7465.1, an applicant is offered a unit
a unit at the three at the three projects with the highest number of vacant
projects with the units. Additionally, under a Voluntary Compliance
highest number of Agreement, which resulted from a Title VI lawsuit, an
vacant units applicant is also offered a unit where his/her race is not
predominant. Furthermore, the Voluntary Compliance
Agreement requires that all applicants for a Section 8
Housing Certificate be cross listed on the BMHA waiting
list. The waiting list for a Section 8 Housing Certificate is
maintained by the Rental Assistant Corporation of Buffalo.
An evaluation of BMHA's use of HUD's Plan B to offer
90 percent of offers units to applicants disclosed that 90 percent of the offers
were rejected were rejected. Based on available information, the crime
rate and location of the projects is the major cause of the 90
percent rejection rate. According to officials of the BMHA,
the projects with the highest number of vacant units are the
projects that are perceived to be the most undesirable;
therefore, it is difficult to persuade applicants to accept
units in those projects. In this regard, we noted that the
BMHA has instituted measures to reduce the crime rate at
targeted projects by participating in HUD's Safe Homes
program. Among other initiatives, we noted that the
BMHA has placed police substations in certain projects,
instituted a drug intervention project, and started a police
walking patrol program.
During our audit, we conducted a survey of offers made by
Some applicants were the BMHA in March, 1995 by sending letters to 422
not interested in a applicants. At the completion of our audit field work, we
public housing unit had received 100 responses. The results of the survey
showed that some applicants had no interest in a public
housing unit, but were interested in obtaining a Section 8
Housing Certificate. These applicants were only put on the
BMHA waiting list to comply with the requirement for
cross listing the applicants with those on the list for a
Section 8 Housing Certificate.
Page 27 96-NY-201-1002
Finding 4
Other applicants declined offers because they were only
Results of Survey
interested in units in particular BMHA projects that could
not be offered under Plan B. The results of our survey are
provided below:
Number Reason why applicant did not accept the units offered
13 The applicant was only interested in housing from the Rental Assistance
Corporation.
55 The applicant was not interested in the particular unit offered, but were interested in
other units at the housing authority.
32 Other reasons
Apart from the above, we found that the units in certain
Units in certain projects
projects are generally precluded from being offered because
are generally precluded
they do not qualify as one of the locations with the largest
from being offered
number of vacancies. As a result, units in those project will
remain vacant for a very long period of time or until
revisions are made to the BMHA's offering plan (HUD's
plan B) to allow units in those projects to be offered.
(b) Units are not prepared for reoccupancy timely
After units were accepted by prospective tenants and turned
VAPC employees level of
over to the VAPC, we determined that VAPC took an
production was very low
average of 45 days to prepare them for reoccupancy. Also,
we determined that the VAPC's level of production was
very low. We noted that in 1994, the average number of
units prepared for reoccupancy by the VAPC, which consist
of 39 employees, was 68 units per month, which is
approximately 1.7 units per employee per month. The low
number of units completed per month is even more
significant when one takes into consideration that painting,
flooring and some plastering of vacant units were
contracted out.
In order to evaluate the condition of the vacant units and to
Vacant units should take
estimate the amount of time needed to prepare a unit for
only 1 to 2 days to
reoccupancy, we inspected 25 of the 417 units that had been
prepare for reoccupancy
vacant for more than 6 months. All of the units inspected
were in fairly good condition and could be ready for
96-NY-201-1002 Page 28
Finding 4
occupancy within two days, and in some cases within one working day. Considering the
above, the VAPC average of 45 days to prepare a unit for reoccupancy appears excessive.
In addition, we noted that the VAPC is not following
BMHA established procedure on trash removal from vacant
units. BMHA personnel informed us that trash containing
perishable items is removed immediately upon move out.
However, during our inspections of the 25 vacant units for
six months or longer we noted that raw trash, food stuff and
personal possessions were still in many units. Such debris
can attract and provide vermin with a place to live and
become a health hazard to other tenants.
(c) Leases are not executed timely with prospective tenants
An average of 106 days The results of our sample of 22 units showed that after
for tenants to execute vacant units were prepared for reoccupancy it took an
leases average of 106 days for tenants to execute leases and take
possession. BMHA staff indicated that they are not able to
give applicants a move-in date sooner because of the
unpredictability of when a unit will be ready. Because of
this, the BMHA advises applicants not to give notice to
their current landlord until they are notified that their unit
are ready. In this regard, the BMHA needs to develop a
system to estimate the date a unit will be ready and
establish a move-in date that will reduce the time between
when a unit is ready and when the selected tenant takes
possession.
Number of units designated for the elderly and disabled is
having a negative impact on vacancy rate
At January 1, 1995, the BMHA had 370 vacant units for
Number of units
elderly and disabled and only 303 applicants on its waiting
designated for the elderly
list. Even if all the elderly applicants accepted a unit, the
may exceed the need
BMHA would still have 67 vacant units designated for the
elderly or disabled. This is an indication that the total
number of units designated for the elderly or disabled may
be greater than the actual need. For example, our review
disclosed that at December 31, 1994, there were 39 vacant
units designated for families, and 75 for the elderly and
disabled at the Lakeview project. The review also disclosed
that Lakeview is the project of choice for many family
applicants; however, most of the vacant units are for the
Page 29 96-NY-201-1002
Finding 4
elderly or disabled despite the fact that sixty two percent of
the vacancies in the project are third floor walk-up units.
Additionally, because many of the units have 3 bedrooms,
we question whether they are appropriately designated since
very few elderly applicants need or qualify for a 3 bedroom
unit. Thus, we believe that the BMHA should consider
converting some of the elderly walk-up buildings to family
use. This would allow more units to become available to
family applicants and also reduce the overall vacancy rate.
Auditee Comments The BMHA's response provides that "the vacancy rate as of
12/31/95 was 26% - a reduction of 5.7% as compared to
12/31/94 (31.7%). The BMHA has established a Vacancy
Reduction Task Force which has one of it's goals a 10%
reduction target for 1996."
According to the BMHA's response, proposals to expand
the offer system, include tenant involvement in the
screening process, revise systems to speed up offers
(eliminate Crosslisting) and streamline other administrative
procedures are included in the Tenant Selection and
Assignment Plan proposals sent to HUD for approval on
7/18/95 and 12/1/95 (revised version). Officials of the
BMHA believe that further delays in the approval of that
plan continues to burden the BMHA in offering it's most
attractive housing stock. BMHA has been pursuing an open
choice offer system for minority applicants and five choices
based on the developments with the greatest percentage of
vacant for majority applicants.
The BMHA's Management Department is receiving
projections of turnovers from VAPC in a more timely
fashion. The projections are accurate and some turnovers
have been prepared before the projected date.
The newly created Vacancy Reduction Task Force is
successfully working toward reducing lease-up time for
applicants. The list of certified applicants waiting for
apartments to be completed is being reduced as VAPC
production increases (up to an average of 106 per months
and rising). However, applications are now being certified
in fewer days during recent months due to procedural
changes.
96-NY-201-1002 Page 30
Finding 4
Projected move-in dates are now identified for transfers,
certified applications, and applicants in the process of
certification. They are sent to the Managers for leasing
about two weeks before the anticipated apartment
completion date (for lease-up activity to begin), and the
Task Force is examining methods to send out applications
at least 30 days ahead of apartment preparation. When the
system has been tested and estimated completion dates can
be locked in, the pre-leasing of many units can occur.
Currently, most apartments are completed about one month
to one month and one-half after the applicant is certified.
As procution increases, this time will be reduced
significantly. This also means that in the future, a unit will
be scheduled for completion in anticipation of an applicant
accepting it.
Trash removal has been a problem for years. The existence
of raw trash in apartments may not be as extensive as
indicated in the finding. Record keeping was poor. A
database was being set up to resolve this and would be the
source to track what trash was removed and where
work/inspections are needed. Managers, upon completing
move-out inspections were to call in all work for raw trash
removal.
The BMHA is continuing to increase efforts under HUD's
Operation Safe Home through increase visibility at several
BMHA projects.
For Recommendation 4C, the Tenant Selection and
Assignment Plan submitted to HUD in December 1995
proposes to eliminate the crosslisting procedure.
The Vacancy Reduction Task Force was formed in
September 1995 to develop strategies and an action plan to
reduce vacancies by 10% each year over the next three
years.
BMHA is addressing the problem of designating elderly,
disabled, and family units. The BMHA is considering a
conversion of Lakeview walk-ups to families (4 buildings,
approved in CGP funding), and the demolition at A.D.
Price. In May 1996, the Board of Commissioners will be
asked to approve a change in the designation, from elderly
Page 31 96-NY-201-1002
Finding 4
to single, of four buildings at Commodore Perry (100 units),
which will allow more units to become available to single
applicant and reduce the overall vacancy rate. We currently
have 2000 people on the singles waiting list.
OIG Evaluation of The figures used in our graph and in our narrative came
Auditee Comments directly from the BMHA's "Occupancy & Marketing
Department 1994 Report". Furthermore, our graph
indicates the time period that is depicted by the graph.
Regarding vacant units, our sample was selected from units
that had been vacant for more than six months. The results
of our inspections of vacant units disclosed that many units
were ready to be leased while others contained trash. In
this regard, we noted that units at four different projects
contained trash and that at least 11 were ready for
occupancy.
Recommendations We recommend that you insure that the BMHA implement
procedures that will reduce the untimely completion of unit
turnaround activities to the extent that units are turned
around within 30 days from the date they become vacant.
Specifically, the BMHA should be instructed to:
4A. Pursue revisions to the plan used to offer units to
applicants that will allow vacancies in all projects to
be filled timely, while maintaining a racially neutral
application process. For example, the BMHA could
change its offer system to allow units to be offered
in a project when its vacancy rate exceeds a
predetermined threshold vacancy rate of 3 percent.
4B. Continue its positive efforts under HUD's Safe
Home Program to reduce the crime rate at targeted
projects.
4C. Evaluate the current procedure of cross listing
applicants and pursue changes that would eliminate
the negative impacts on the vacancy rate. In this
regard, only those applicants who are interested in
obtaining either a Section 8 Housing Certificate or
a unit in public housing should be cross listed.
96-NY-201-1002 Page 32
Finding 4
4D. Initiate procedures to increase the productivity of
the VAPC and/or consider contracting out the
functions performed by that unit.
4E. Consider redesignating units to meet the needs of
the population; such as, converting one or more of
the under utilized buildings for the elderly into
buildings for tenants with families.
Page 33 96-NY-201-1002
Finding 4
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96-NY-201-1002 Page 34
Finding 5
The BMHA Needs to Improve Cash
Management Procedures
Our review disclosed that the BMHA: (a) did not invest its excess funds, (b) failed to periodically
solicit and evaluate its banking services, and (c) improperly used operating funds of the Federal
program to pay costs incurred by State projects. As a result, no investment income was earned,
banking services may not have been adequate, and funds for Federal projects were temporarily
used improperly. We believe that these conditions occurred because the BMHA's cash
management procedures in the areas of investing, banking, and requesting City funds were not
adequate.
Section 401(E) of the Annual Contributions Contract (ACC)
Criteria
requires that excess funds on deposit in the General fund
shall be invested in HUD-approved investment securities.
HUD Handbook 7475.1 Financial Management Handbook
assigns specific responsibilities to PHAs which include
operating projects with maximum efficiency and economy.
The primary goals of cash management procedures are to
BMHA does not have
assure the availability of cash for transactions, preserve the
adequate cash
value of cash resources, and earn maximum investment
management procedures
returns on excess funds until they are disbursed. We
in certain areas
reviewed the process of managing cash flow at the BMHA
and found that it does not have adequate cash management
procedures in certain areas. Specifically, we found that the
BMHA: (1) has no investment policy and did not invest its
excess funds, (2) did not perform periodic evaluations or
solicitations for banking services, and (3) improperly used
operating funds of the Federal program to pay costs
incurred by State projects.
Our review disclosed that during the audit period the
BMHA did not invest
BMHA did not invest its temporary excess funds. To
excess fund
determine the approximate amount of interest income that
could have been earned if excess funds had been invested,
we obtained the average monthly investable balance from
the Analysis Summary Reports provided to us by the Bank.
Page 35 96-NY-201-1002
Finding 5
We determined that, from July 1, 1993 to December 31,
1994, the monthly average investable balance was
$2,435,706.11. Using 30 day Treasury bill rates,
approximately $146,551 of investment income would have
been earned if excess funds had been invested. Since
investment income reduces the amount of operating
subsidies provided to PHAs, the BMHA's failure to realize
such income may have caused HUD to approve and provide
more operating subsidies for 1994 than should have been
necessary.
We believe surplus funds were not invested because the
The BMHA does not
BMHA does not have an investment policy. Such a policy
have an investment
would allow for eligible investments, ensure that all excess
policy
funds are properly invested, and designate who is
responsible for the supervision and management of the
funds invested.
Our review of current banking services disclosed that the
Lack of adequate
BMHA has not maintained adequate knowledge of its
knowledge of banking
banking services. Our review disclosed that the BMHA
services
staff did not know exactly what services were provided to
the BMHA by the Bank, the cost of the services, or the
amount of temporary surplus funds available for
investments. According to HUD Handbook 7475.1 REV
CHG-1, 4-2 (C), "a PHA should know what bank services
it uses and the cost of the services to the PHA".
Additionally, we found that the BMHA did not periodically
BMHA did not
perform solicitations for banking services. According to
periodically perform
HUD Handbook 7475.1 REV CHG-1, 4-2(e)(1), banking
solicitation for banking
services should be periodically solicited through
services
competitive solicitation...in the form of a Request for
Proposals (RFP)." In this regard, we noted that the BMHA
has had its accounts with the same Bank since 1956 and
could not find any evidence that banking services had ever
been reviewed or that a competitive solicitation for banking
services had been performed. Therefore, the BMHA does
not have adequate assurance that bank services being
provided are adequate and their cost are reasonable.
Funds for Federal A review of the BMHA's revolving fund disclosed that
projects were used to pay Federal funds were routinely used to pay costs incurred
costs of State projects under State housing projects. This resulted from the
96-NY-201-1002 Page 36
Finding 5
BMHA's failure to timely bill the City for its share of costs incurred by State projects.
Because of untimely billing, at August 28, 1995, the City owed the BMHA $1,270,265 for
costs incurred by State projects for the six month period ended March 31, 1995.
Consequently, Federal funds are being advanced through the revolving fund account to pay
costs incurred by State projects. In our opinion, the use of operating funds of the Federal
program to pay costs incurred by State projects violates Section 406 of the ACC, which
states that PHA's will use operating receipts for costs which are necessary for project
operations. In addition, funds advanced to pay costs of non-Federal activities are not
available as surplus funds to be properly invested.
Auditee Comments The BMHA has implemented an investment plan and has
earned over $19,000 in interest from August 1995 to
December 1995. An RFP for banking services was issued
and as a result banking is now done at M & T. All of the
BMHA's accounts are now interest bearing and all banking
fees have been waived by the bank. The BMHA hopes that
when they get a new financial software package it will be
more conducive to timely closing of the books and thereby
allow for more timely reimbursement requests from the City
of Buffalo.
Recommendations We recommend that you ensure that the BMHA has:
5A. Developed and adopted an adequate Investment
Policy for investing excess cash.
5B . Procedures in place to continuously evaluate its
banking services and obtain future services by
competitive solicitation in the form of request for
proposals.
5C. Developed and implemented requisition procedures
to obtain timely payments from the City for its share
of costs incurred by State projects. The
implementation of the procedures should eliminate
the need for the BMHA to advance operating funds
of the Federal program to State projects to pay their
operating costs.
Page 37 96-NY-201-1002
Finding 5
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96-NY-201-1002 Page 38
Finding 6
The BMHA Needs to Improve Personnel
Practices
Our review disclosed various deficiencies in BMHA's administrative practices and controls.
Specifically, we found that: (1) staffing levels exceed HUD's suggested levels; (2) overtime costs
appear excessive; (3) controls over aspects of personnel and travel practices are not adequate; and
(4) Commissioners are receiving compensation in breach of the ACC. We attribute these
deficiencies to management's failure to: evaluate staffing levels; control the approval of
overtime; issue a written personnel policy; exercise management controls over travel practices;
and comply with the provision of its ACC that prohibit the use of Federal funds to pay
compensation to Commissioners. Consequently, the BMHA cannot assure HUD that its staffing
levels are necessary, that staffing costs, including overtime costs, are reasonable; or that travel
reimbursement claims were for needed and authorized activities. Furthermore, the unauthorized
compensation to the Commissioners has result in $32,825 of operating funds being used for
ineligible expenses.
a. BMHA's staffing levels exceed HUD's suggested levels
HUD Handbook 7460.7 REV-1, paragraph 2-3 provides
Criteria
guidance on evaluating the performance of a PHA. The
guidance includes recommended staffing levels for housing
authorities with more than 1,250 units. The recommended
staffing levels for such PHAs provide for one maintenance
employee for every forty units (1:40) and one
administrative employee for every sixty five units (1:65).
In February 1995, the BMHA had a total of 470 employees,
of which 425 were paid from project funds of the Federal
programs. Of the 425 employees charged to the Federal
program, 387 were maintenance and administrative
employees. When the BMHA's staffing levels are
compared to HUD's recommended levels for PHA with
more than 1,250 units, it discloses that the BMHA has as
many as 187 more maintenance and administrative
employees than HUD's guidance on staffing levels
recommends, as shown below:
Page 39 96-NY-201-1002
Finding 6
Number of Employees
Actual HUD Number in
Number of Guidelines Excessive of
Employees Guidelines
Maintenance 227 124 +103
Administrative 160 76 + 84
TOTAL 387 200 +187
The number of employees shown in the above column
"HUD Guidelines" was determined by using the HUD
recommended ratios of 1 maintenance employees to every
40 units and one administrative employee to every 65 units.
In addition to determining that the current staffing levels are
excessive, we also noted that the BMHA's ratio of
employees to units has exceeded HUD's guidelines for the
past five fiscal years, which was discussed in a "General
Accounting Office (GAO) report, dated March 1, 1991. At
the date of the GAO report, which provided statistics as of
1990, the BMHA had 383 employees under its Federal
program. Since 1990, the BMHA has increased the number
of employees under its Federal program by 42. In our
opinion, the staffing levels at the BMHA needs to be
evaluated to determine whether they are excessive.
In conjunction with the above, we noted that the staffing
Under utilized staffing
size of some departments may not be justified by the
levels in some
amount of work being performed. For example, the staffing
departments
size of the Management Department is not supported by the
amount of duties performed by that Department. For
instance, we noted that there are a total of 61 employees in
the Management Department, and that an average of 4 of
these employees is assigned to each of the BMHA's 11
management offices. Under the BMHA's organizational
structure, the Housing Managers at project sites are not
responsible for rent collections, Housing Quality Standards
inspections, tenant admission, or maintenance. They appear
to be only responsible for conducting tenant recertification
and being a contact point for the tenants. In our opinion, a
staff of 4 employees at each site appears excessive for the
duties assigned to Housing Managers. Moreover, in two
cases, we noted that the site offices for two projects are
either across the street or a courtyard from each other. To
96-NY-201-1002 Page 40
Finding 6
have 4 employees in each of those offices may not be
necessary or a practical use of staff resources.
Additionally, the ratio of supervisory personnel to non-
Number of supervisory
supervisory personnel in the BMHA's Accounting
positions in accounting
Department appears unreasonable. There is a supervisory
department may be
employee for every non-supervisory employee (1:1).
unreasonable
Further, we found two supervisory positions that do not
have nonsupervisory employees assigned to them.
Consequently, we believe that the number of supervisory
positions in the Accounting Department may be
unnecessary and unreasonable.
b. Controls over overtime costs are inadequate
In addition to high staff levels, the overtime costs at the
Overtime costs is very
BMHA is also very high. During our audit period, July 1,
high
1993 to December 31, 1994, the BMHA paid $2,102,137 in
reported overtime, which was approximately 12% of the
total salary costs of $18,041,164. Our review disclosed that
there is a lack of adequate controls over the authorization of
overtime, and that the BMHA does not have any formal
policy governing the approval of overtime. In some cases,
we found that overtime was not authorized in advance; that
overtime work was not supervised; and that there is
inadequate documentation showing that overtime work was
necessary. In our opinion, these deficiencies have
contributed to the BMHA's high overtime cost. In order to
reduce and prevent unnecessary overtime costs, we believe
that the BMHA should develop and implement a formal
policy governing the use and approval of overtime.
According to HUD Handbook 7401.1, Chapter 5, the local
BMHA does not have a
agency must formally adopt a personnel policy comparable
written Personnel Policy
to local public practice. At the time of our audit, the
BMHA did not have a written Personnel Policy.
Consequently, the BMHA does not have written procedures
to periodically evaluate the performance of all employees.
Permanent employees are not routinely given an annual
performance evaluation. The lack of evaluations adversely
impacts both the employees and the BMHA. In our
opinion, performance evaluations are needed to reward
good performers and to provide substandard performers
with feedback on areas where improvements are needed.
Page 41 96-NY-201-1002
Finding 6
During the audit, we were told by the Administrator of
Personnel that her staff is currently writing a Personnel
Policy.
For our audit period, total travel cost contained expenses of
Travel costs lack
$179,405 that represent reimbursements to employees for
adequate supporting
local travel. The BMHA's travel policy allows for a $9.00
documentation
per day flat rate for local travel, which is consistent with the
local government travel policy. However, HUD Handbook
7401.1 Chapter 5, states that if the local government has
officially adopted a policy for reimbursement for the use of
privately owned vehicles, the PHA may adopt the policy
subject to the PHA reimbursing based on: (1) mileage or (2)
a flat monthly allowance. Since the PHA is not reimbursing
employees for local travel based on mileage or a flat
monthly allowance, its policy of allowing a $9.00 per day
for local travel does not meet HUD's requirements.
Therefore, the BMHA's local travel policy of reimbursing
employees at an unsupported flat rate of $9.00 a day is
questionable. Accordingly, we believe that the BMHA
should revise its travel policy to require reimbursement for
local travel based on mileage.
Additionally, our review noted that various Commissioners
Commissioner's local
were reimbursed for local travel costs totaling $7,204.
travel reimbursements
These costs not only lacked supporting documentation, but
appear unreasonable
in some cases appeared unreasonable. During our 18
months audit period, one commissioner claimed $9.00 for
local travel for 305 days while another put in claims for 274
days. Such reimbursements appear excessive and
unreasonable. Thus, we believe that the BMHA should
require the Commissioners to provide documentary support
with claims for reimbursement for local travel.
Section 307(D) of the ACC provides that no funds of any
BMHA Commissioners
project shall be used to pay compensation for services of
received compensation
Board members of the local authority. During our audit
period, the BMHA paid members of its Board of
Commissioners, a total of $21,136. The BMHA also paid
health insurance and workmen's compensation coverage for
the Commissioners, which totalled $30,539. BMHA staff
indicated that those costs were paid with non-Federal funds.
However, our review disclosed that the total disbursement
of $51,675 were made from the revolving fund and that
96-NY-201-1002 Page 42
Finding 6
only $18,850 of the total amount was reimbursed from non-
Federal funds. Therefore, the remaining amount of $32,825
were made from the Federal program's operating fund.
Since the ACC and HUD Handbook requirements prohibit
any compensation for services rendered by Board members,
the BMHA should reimburse the Federal program's
operating fund $32,825, from non-Federal funds.
Auditee Comments The BMHA response states that the ratios of average
number of administrative employees to units are intended
as guidance for purposes of assessing PHA staffing.
BMHA officials believe that the data is to be used as
indicators rather than standards; and that the geographic
locations (northwest vs. southeast), type of heating plans
(high pressure steamboilers vs. individual furnaces), types
of buildings (highrise vs. low rise) and type of construction
(brick vs. frame) should be considered in determining the
size of a PHA's staff. Officials advised that because of
Union agreements over the years, many of our maintenance
staff positions are so specialized that additional staff is
required to complete the work. Currently, the BMHA is in
negotiations with the Union in an attempt to combine some
maintenance titles or create new titles that would allow one
worker to do more than one trade.
The BMHA response provides that past HUD reviews did
not cite staffing as a problem. The Executive Director
contends that to the best of her knowledge, all previous
budgets and revisions were approved by HUD. Therefore,
HUD granted the approval and funding to operate at the
staffing level it did during the audit period.
The BMHA's response provides that the Housing Managers
do more than "conduct tenant recertification, and serves as
a contact point for the tenants..." They are charged with
enormous responsibilities and work diligently to provide a
variety of services for residents, employees, and the general
public. Not only do they proceed with the efficient dispatch
of those functions described in the response, and other
duties too numerous to set forth, they are expected to
continue to provide them with a shrinking staff.
The finding also points out that the Finance department has
Page 43 96-NY-201-1002
Finding 6
a high number of supervisory positions yet fails to point out
that supervision is a minor portion of 70% of those titles'
responsibilities. The BMHA further points out that it is
required to follow Civil Service law and must therefore
assign work according to Civil Service specifications. The
Specifications on an Assistant Accountant limit the type of
independent work and require a larger degree of
supervision. The Senior Accountant specifications do not
limit independent work and allows them to direct others that
are engaged in the same type of work (Assistant
Accountants and clerical staff). Also, the Senior
specifications demand that they be supervised by someone
else who can make a decision and a recommendation to
another supervisor. Therefore, the BMHA also has the
Principal Accountant (overseeing 7) and an Assistant
Director (overseeing 5 and assisting the Director on
confidential matters). In reality, the Seniors' job
specifications do not allow for analytical work either, it is
a point which could be argued by the Unions.
The BMHA response provides that it has establish
procedures to ensure that overtime work is necessary and
properly authorized. In August 1995 the BMHA
established a "health and safety" priority for all overtime
work, as well as a requirement of the approval of the
Executive Director or the Assistant Executive Director. All
Department heads must also sign off on all requests for
overtime so as to ensure accountability.
The BMHA has completed a draft personnel policy manual
and it includes an implementation of performance
evaluation standards for all staff members. An outline of
the table of contents and performance evaluation section are
included in the BMHA comment. Moreover, currently all
supervisory personnel are being given supervisory training
by ECC, which includes performance evaluations. The
evaluation process will begin July 1st and will be based on
employee's anniversary date.
The BMHA plan to revise its reimbursement travel policy
on local travel to require documentary support and a basis
for reimbursement that comply with HUD requirements.
The BMHA has reimbursed the Revolving fund the entire
96-NY-201-1002 Page 44
Finding 6
amount of funds on the books which were related to
"Commissioner's costs" from the NYS grant in aid. The
Commissioners have been requested to revise their current
benefit package by July 1, 1996.
Recommendations We recommend that you ensure that the BMHA:
6A. Evaluate and reduce staffing to the level needed to
administer its programs.
6B. Establish procedures to ensure that overtime work is
necessary and properly authorized.
6C. Develop a written personal policy that includes the
implementation of a annual performance evaluations
for all staff members.
6D. Revise its reimbursement travel policy on local
travel to require documentary support and a basis
for reimbursement that comply with HUD
requirements.
6E. Reimburse the Federal program's operating fund the
$32,825 that were paid to or on behalf of
Commissioners, from non-Federal funds.
Page 45 96-NY-201-1002
Finding 6
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96-NY-201-1002 Page 46
Finding 7
The BMHA Needs to Implement a Uniform
System to Process Purchase Orders
The BMHA's system for processing purchase orders is cumbersome and time consuming. This
deficiency occurred because the BMHA does not have a uniform system to process purchase
orders. As a result, unnecessary staff time is spent on a departmental basis performing
purchasing procedures and processing purchase orders, which have been so cumbersome and
time consuming that the BMHA has lost available discounts from vendors.
Section 201 of the ACC provides that the Authority at all
Criteria
times will operate each Project in such a manner as to
promote efficiency and economy. HUD Handbook 7460.8
Chapter 3, Paragraph 3.2, provides that to assure that all
staff are operating from a common system of procedures the
Housing Authority should have a set of operational
purchasing procedures designed for the working level, such
as a handbook or standard operating procedures.
Our review disclosed that the BMHA's procurement policy
BMHA has not
only provides information pertaining to the method of
established written
procurement and does not address standard operating
procedures for processing
procedures for processing purchase orders. As a result, each
purchase orders
department has created its own purchasing procedures. Top
management of the BMHA has not examined these
procedures to determine if they are working effectively for
the individual departments or for the BMHA as a whole.
Furthermore, the BMHA's Accounting Department has not
established clear and concise written procedures outlining
the payment process for purchases made using purchase
orders. An examination of 30 executed purchase orders
disclosed that they were all initiated after the BMHA
received the item and paid the invoice.
In addition, we found that the system for processing
The system for
purchase orders is cumbersome due to unnecessary steps
processing purchase
that have been added to the process over time. For example,
orders is cumbersome
the procedures require numerous signatures from low level
Page 47 96-NY-201-1002
Finding 7
management officials to the Executive Director. Most of the signatures do not provide any
additional control within the process, but have increased the time it takes to process a
purchase order. Our review disclosed that it took an average of 31 days to process a payment
after the invoice was received. In addition, under the current process the purchase order is
not typed until the requesting department receives a copy of the payment invoice from
Accounting. We found that it took an average of 9 days for a purchase order to be typed,
approved, and sent to Accounting. Afterward, it took an average of 22 days to be processed
in Accounting. As a result of the lengthy process, we found instances where the BMHA was
unable to take advantage of available discounts from vendors.
In our opinion, the lack of a uniform system for processing
The BMHA staff is being
purchase orders has resulted in the unnecessary use of staff
under utilized
resources. Since each department has to procure its own
goods, various employees in each department are used to
perform the purchasing functions. Moreover, we found that
personnel in one department are duplicating the tasks
performed in another department. For example, Technical
Operations performs a match of the purchase orders,
receiving copies, and invoices. Likewise, the Accounting
Department performs the same type of match. This
duplication can be attributed to the individually established
systems used to process purchase orders and a lack of
communication between the departments.
Auditee Comments The BMHA's response provides that action was approved
on March 25, 1996, that will allow for the elimination of the
cumbersome signature process referred to in the finding.
The BMHA has decided to adopt the changes recommended
in Finding #7 and is in the process of implementing those
changes.
Recommendations We recommend that you ensure that the BMHA:
7A. Establish and implement written purchase order
procedures for the whole BMHA. These would
include procedures for:
1. requesting items;
2. procuring items;
3. receiving items; and
4. accounting for purchase orders.
96-NY-201-1002 Page 48
Finding 7
The procedures must clearly define the
responsibilities of the personnel administering the
system.
7B . Establish and implement methods to periodically
evaluate the purchase order system to ensure that it
is meeting its designed objectives.
Page 49 96-NY-201-1002
Finding 7
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96-NY-201-1002 Page 50
Finding 8
The Accuracy of the PHMAP Certification is
Questionable
The BMHA's Public Housing Management Assessment Program (PHMAP) Certification as
submitted to HUD for the Fiscal Year Ended June 30, 1994 contained various conclusions that
were based on inaccurate information and data. The erroneous conclusions resulted from
incorrect calculations and improper procedures in computing the scores of some indicators and
the BMHA's failure to assure that computer generated data was accurate. As a result, the
PHMAP certification was assigned a higher score than it should have received, which resulted
in an inaccurate performer status for the BMHA. In our opinion, the inaccurate status prevented
the BMHA from being designated as troubled; thus, relieving it from having to execute a formal
Memorandum of Agreement with HUD to correct performance problems, and from HUD's
oversight and reporting requirements.
HUD Regulations, 24 CFR 901.100, and Handbook 7460.5
Criteria
require PHAs to submit responses and a PHMAP
certification within 90 days after their fiscal year begins for
six indicators. Also, the regulations and Handbook
instructions provide that the certification shall be for the
information pertaining to the immediate past fiscal year and
shall be based on actual data for each indicator. On
September 29, 1994, the BMHA submitted its PHMAP
certifications for the Fiscal Year Ended June 30, 1994. The
certifications showed that the BMHA received a PHMAP
score of 70 percent and was assigned a standard performer
status by the HUD Buffalo Area Office. However, our
review disclosed inaccuracies in the data used to score
several indicators certified to by the BMHA. The results of
our review are as follows:
Indicator 1: Vacancy Number and Percentage.
The BMHA certified to a .9 percent reduction of the actual
Reduction in vacancy
vacancies over the prior three years, which resulted in a
percentage overstated
PHMAP grade of E and 9 points for this indicator. Our
review disclosed that there had not been a reduction in the
percentage of vacant units. In fact, there was a 5.5 percent
Page 51 96-NY-201-1002
Finding 8
increase in the actual number of vacancies which would
have resulted in a F grade and 0 points. In computing the
actual vacancy rate, the BMHA deducted the number of
vacant units proposed, scheduled and under modernization
from the total number of units vacant. This is not correct
according to Appendix 5 of HUD Handbook 7460.5, which
provides the HUD prescribed method for computing the
actual vacancy rate. The HUD prescribed way only
excludes those units funded and on-schedule under
modernization.
Indicator 6: Outstanding Work Orders
On the HUD-50072, PHMAP Certification form, the
Work order data not
BMHA certified that 100% of emergency items were
reliable or adequately
corrected or abated in 24 hours; that the percent of
supported
outstanding work orders was 3%; and that progress had
been demonstrated in reducing the time required to
complete work orders. Our review disclosed serious
problems with the computerized work order tracking system
to the extent that the validity and veracity of the system is
highly questionable. We determined that maintenance
employees have access to the system to the degree that they
could go into the system and change categories, the amount
of materials used, the time, and other data items after work
orders have been completed and inputed into the system.
Also, the data used for the PHMAP scores did not agree
with the actual data in the system. For example, under
PHMAP, the BMHA indicated that there were 8 emergency
work orders in 1994 and all were completed in 24 hours.
Our review of the computer system indicated that there
were 30 emergency work orders in 1994. In addition,
included in the BMHA's system as work orders were
numerous non-maintenance items such as orders for
material, inspections, and cancelled work orders. As a
result, the number of total work orders in the system were
significantly higher than the actual number of maintenance
work orders. The artificially created high number of total
work orders caused the percentage of outstanding work
orders to be lower than it is in reality. Consequently, the
maximum score the BMHA received under this indicator
was not supported by the actual data.
96-NY-201-1002 Page 52
Finding 8
Indicator 7: Annual Inspections
This indicator has four components. Under this indicator,
HQS inspections not
the BMHA certified on form HUD-50072, for FY 1994,
performed on all units
that it has a system in place to track inspections and repairs
(component 1); that 100% of units had been inspected and
met Housing Quality Standards (HQS) (component 2); that
deficiencies in units were corrected in a average of 9.4 days
(component 3); and that the major systems were inspected
annually (component 4). Consequently, the BMHA's
PHMAP score was the maximum of 30 points. Our review
disclosed that the BMHA did not perform full HQS
inspections of vacant units because BMHA officials
believed that vacant units were not required to have full
HQS inspections. We disagree, inasmuch as HUD
Handbook 7460.5 provides that in computing the number of
units to be inspected, only units in a modernization program
or approved for demolition should be excluded. Since the
BMHA had over 1000 vacant units that had not been
inspected it should have received a grade of F under
component 2. Furthermore, of the 25 vacant units we
inspected, ten did not meet HQS due to existing
deficiencies. Therefore, the BMHA should not have
received a grade of A under component 3, which indicates
that all deficiencies in a unit had been corrected, and done
in 25 days or less. In our opinion, the BMHA should have
received a grade of F and 0 points under this component.
We believe that the accuracy of the BMHA's PHMAP
BMHA's PHMAP score
certification is questionable and that the BMHA may have
overstated
scored itself higher than it should have to avoid being
designated as a troubled authority. In our opinion, if the
PHMAP score for the above indicators had been properly
computed, the BMHA most likely would have received a
score of 60 or less and been designated as a troubled
authority.
Auditee Comments The BMHA does not agree with the finding as follows:
Page 53 96-NY-201-1002
Finding 8
Vacancy Number and Percentage
The BMHA's response provides that the BMHA calculated
its vacancy statistics using the 103 Annual Summary. It
further provides that our finding may have only taken into
account the Vacancy percentage as reported on the HUD
form 51234, which has no units deducted at all for
modernization.
Outstanding Work Orders
The BMHA's response provides that 30 Emergency work
orders from the computer needs to be adjusted for work
orders at State projects and for items that were not
emergencies. Also, BMHA officials do not feel that the
number of work orders is artificially high or that the number
of cancelled work orders is minimal.
Annual Inspections
BMHA officials believe that the statement that "BMHA
Officials believe that vacant units were not required to have
full HQS inspection" is not entirely accurate. Vacant units
were considered excused from inspections as compliance
with HQS would be insured prior to reoccupancy. They
further indicated that starting with 1992, the BMHA has
consistently inspected more than 100 percent of the units
required by PHMAP criteria.
OIG Evaluation of Vacancy Number and Percentage
Auditee Comments
Our calculations of the Vacancy rate and percentage were
done in accordance with PHMAP requirements. In
addition, we reviewed a BMHA memorandum showing
vacancy data from Fiscal Year 1989 to Fiscal Year 1994.
The memorandum took into account units under
modernization and showed a increase in the number of
vacant units available as of December 31 from 1990 to
1993 along with a decrease in the occupancy percentage.
Outstanding Work Orders
As noted in Finding 2, the BMHA's work order system is
unreliable, inefficient and unsecured. As a result, the
96-NY-201-1002 Page 54
Finding 8
PHMAP score for outstanding work orders was based on
unreliable information.
Annual Inspections
Our review indicated that all modernization vacant units did
not receive a complete HQS inspection. Also, our
inspection of 25 vacant units indicated that some vacant
units had uncorrected HQS deficiencies for over a year. As
a result, the certification that 100 percent of the units had
been inspected and meet HQS is questionable.
Recommendations We recommend that appropriate staff of your office:
8A. Work closely with the BMHA to ensure that its staff
is fully aware of the PHMAP criteria and the extent
and type of data required to support its PHMAP
certifications
8B. Perform an on site confirmation review of the
BMHA's Fiscal Year 1995 PHMAP submission.
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Finding 8
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Finding 9
Settlement Cost Should Have Been Allocated
Among all Programs
The BMHA made all settlement payments to terminated employees from the Federal program's
operating fund. As a result, the Federal program was charged the entire amount of the settlement
payments instead of an allocated share in accordance with requirements of the Office of
Management and Budget, Circular A-87. According to PHA officials, the settlement payments,
which totalled $92,214 were made to avoid potential litigation, and at the time the decision was
made, consideration was not given to allocating the associated cost among all program
administered by the BMHA.
The Office of Management and Budget Circular A-87, Cost
Criteria
Principles for State and Local Governments, provides that
a cost is allocable to a particular cost object to the extent of
the benefits received by the objective. Since settlement
payments were made to employees connected with the
overall administration of the BMHA, the associated cost
should have been allocated among all the programs
administered by the BMHA.
Our audit disclosed that on July 28, 1995, the BMHA
Settlement payments
executed settlement agreements with three former top level
charged to Federal
employees, which provided for payments totalling $92,214.
program
Since the BMHA did not execute employment agreements
with those employees, conditions pertaining to employment
termination were not in writing. According to a PHA
official, settlement payments were made to avoid litigation
with the employees concerning their employment
termination. The official also informed us that at the time
the decision was made to make the settlement payments,
allocating the associated cost among all programs was not
considered.
In a letter dated July 28, 1995, the local HUD Office
informed the PHA that they had no objections to the
settlement payments; and that "The payments should be
made from non-Federal funding sources, e.g., rent receipts
Page 57 96-NY-201-1002
Finding 9
or administrative fees earned from Section 8 properties".
Inasmuch as the settlement payments were made from the
Federal program's operating fund through the revolving
fund, we question whether non-Federal funds were used.
Also, we question the BMHA's decision to charge the entire
amount of the cost to the Federal program since the
terminated employees served all programs administered by
the BMHA, including the State program. Therefore, we
believe that the employee termination costs of $92,214
should be equitably allocated among all programs.
In reference to the above issue, we believe that the BMHA
Written employment
should have written employment agreements with
Agreements are needed
employees appointed by the Board of Commissioners.
Such Agreements should contain termination provisions
setting forth the conditions, reasons and procedures for
termination. Thus, reducing the possibility of potential
litigation due to employment termination, and the need to
make settlement payments to avoid potential litigation.
Auditee Comments BMHA officials agreed that the finding is technically
correct; however they feel it would not be fair to require the
Authority to reimburse the appropriate portion of the
settlement costs from operating reserves. Also, the BMHA
indicated that current appointees will be requesting
employment agreements from the Board of Commissioners.
OIG Evaluation of The crucial aspect of this finding is to recommend actions
Auditee Comments that will assist in preventing the need to make settlement
payments to terminating employees in the future.
Therefore, we have revised our recommendations to require
the BMHA to execute employment agreements with certain
employees; and to allocate future settlement cost among all
programs administered by the BMHA, if appropriate.
Recommendations We recommend that your office:
9A. Ensure that all employees appointed by the Board of
Commissioners are covered by employment
agreements that contain termination provisions
96-NY-201-1002 Page 58
Finding 9
setting forth the conditions, reasons and procedures
for termination.
9B. Instruct the BMHA to properly allocate all future
settlement cost among all programs administered by
the BMHA, if appropriate.
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Finding 9
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96-NY-201-1002 Page 60
Other Matters
Project Based Accounting
HUD Regulations 24 CFR 990.320 require PHA's to certify that it is aware of and is taking steps
to implement project-based accounting and will produce the fiscal year-end reports required
under CFR 990.315. The BMHA made the required project based accounting certification for
its fiscal year beginning July 1, 1993 . However, the BMHA has not implemented a project-
based accounting system or produced the fiscal reports required under 24 CFR 990.315.
In addition to meeting the HUD requirements, a project based/cost center accounting system
would allow the BMHA to more readily identify problem projects so that corrective actions can
be taken promptly. Therefore, BMHA should contact the Buffalo Area Office to obtain more
information concerning the project based accounting requirements.
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Other Matters
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96-NY-201-1002 Page 62
Internal Controls
In planning and performing our audit, we considered internal controls of the BMHA in order to
determine our auditing procedures and not provide assurance on internal controls. Internal
controls consist of a plan of organization and 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 is obtained, maintained, and
fairly disclosed in reports.
We determined that the following internal controls related
Internal Controls
to the categories listed below were relevant to our audit
Assessed
objectives.
• Management Information Systems
• Maintenance
• Inventory Controls
• Nonexpendable Equipment
• Admission & Occupancy
• Travel
• Cash Management
• Procurement
We evaluated all of the control categories identified above
by determining the risk exposure and assessing control
design and implementation.
It is a significant weakness if internal controls do not give
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.
Based on our review, there are significant weaknesses in the
BMHA has significant
internal control areas cited in the Findings.
weaknesses in internal
controls
• Management Information Systems (Findings 1 thru 3)
• Maintenance (Finding 2)
• Inventory Controls (Finding 3)
• Nonexpendable Equipment (Finding 3)
• Admission & Occupancy (Finding 4)
• Cash Management (Finding 5)
Page 63 96-NY-201-1002
Internal Controls
• Travel (Finding 6)
• Procurement (Finding 7)
96-NY-201-1002 Page 64
Follow Up On Prior Audits
The latest audit performed by an Independent Public Accountant (IPA) was for the period ending
June 30, 1994. The report did not contain any audit findings and there were no unresolved
findings from prior years.
In March 1991, GAO issued a report entitled Management Issues Pertaining to the Buffalo
Municipal Housing Authority. The report addressed issues concerning the potential effectiveness
of the voluntary compliance agreement, the BMHA's high vacancy rate, and the BMHA's staffing
levels exceeding HUD's guidelines. These issues are discussed in this report as part of Finding
3 and 5.
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Follow Up On Prior Audits
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96-NY-201-1002 Page 66
Appendix A
Distribution
Secretary's Representative, New York/New Jersey, 2AS
Director, Public Housing, Buffalo Area Office, 2CPH (2)
Director, Accounting Division, New York/New Jersey
Special Assistant, Buffalo Area Office, 2CS (3)
Assistant to the Deputy Secretary for Field Management, SDF, Room 7106
Deputy Assistant to the Secretary for Field Management, SDF, Room 7106
Office of Public and Indian Housing, PF (Attention: Comptroller, Room 4122) (3)
Acquisitions Librarian, AS (Room 8141)
(Acting) Chief Financial Officer, F (Room 10166) (2)
Deputy Chief Financial Officer, FF (Room 10166) (2)
Associate General Counsel, Office of Assisted Housing and Community Development, CD,
Room 8162
Assistant Director in Charge, US GAO, 820 lst Stret, NE Union Plaza, Building 2,
Suite 150, Washington, DC (2)
Buffalo Municipal Housing Authority
Page 67 96-NY-201-1002
Appendix A
96-NY-201-1002 Page 68
Buffalo Municipal HA, Buffalo, NY
Published by the Department of Housing and Urban Development, Office of Inspector General on 1996-06-21.
Below is a raw (and likely hideous) rendition of the original report. (PDF)