Issue Date
March 13, 1996
Audit Case Number
96-NY-204-1001
TO: Carmen Valenti, Director, Office of Public Housing
New Jersey State Office
FROM: A. Paul Kane, District Inspector General for Audit
New York/New Jersey
SUBJECT: Housing Authority of the City of Hoboken
Low Rent Housing Program
Hoboken, New Jersey
We have completed an audit of the Housing Authority of the City of Hoboken, New Jersey
(hereafter called the PHA) pertaining to selected operations of its Low Rent Housing Program.
The audit generally covered the period from October 1, 1993 through June 30, 1995, and, where
appropriate, was extended to December 31, 1995. The objectives of the audit were to determine
whether the PHA complied with the U.S. Department of Housing and Urban Development
(HUD) requirements and policies pertaining to: 1) personnel practices; 2) procurement; 3)
maintenance; and 4) housing quality standards.
Generally, the PHA maintained its housing units in decent, safe and sanitary condition. In
particular, we found that the PHA's housing stock met the required Housing Quality Standards
and can be considered comparable to that of commercial apartment buildings in the area.
However, this report contains two findings that warrant your attention. The findings showed that
the PHA entered into an employment buyout arrangement with its Executive Director that in our
opinion was not necessary and reasonable. Also, the PHA procured professional legal services
in a manner that did not provide for full and open competition. As a result, we consider
$171,476.42 as unnecessary and unreasonable costs and $17,482.10 as unsupported costs.
Within 60 days, please give us, for each recommendation cited in the report, a status report on:
(1) the corrective action taken; (2) the proposed corrective action and the date to be completed;
or (3) why the 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 William H. Rooney, Assistant
District Inspector General for Audit on (212) 264-8000 extension 3978.
Management Memorandum
(THIS PAGE LEFT BLANK INTENTIONALLY)
96-NY-204-1001 Page ii
Executive Summary
We completed an audit of the Housing Authority of the City of Hoboken (PHA) pertaining to
selected operations of its Low Rent Housing Program. Our objectives were to determine whether
the PHA complied with HUD's requirements and policies pertaining to: 1) personnel practices;
2) procurement; 3) maintenance; and 4) housing quality standards.
Our review disclosed that the PHA complied with HUD's regulations and requirements pertaining
to the housing quality standards. Also, the housing units were well maintained and comparable
to commercial units in the area. However, in regard to personnel practices and procurement, we
questioned an employment buyout arrangement existed with the PHA's Executive Director and
we questioned the procurement of the PHA's legal services.
The PHA paid its Executive Director $171,476.42 in excess
Buyout Arrangement
of his annual salary to buyout the last nine months of his
With Executive Director
five year employment contract. According to PHA
Was Unnecessary
Commissioners, the health of the Executive Director was a
major concern. However, one year after the buyout, the
Executive Director was still functioning in the same
capacity. We consider the buyout arrangement as
unnecessary resulting in unreasonable charges to the PHA.
The PHA awarded a legal service contract that had a
PHA Legal Services
different scope of services and different method of payment
Contracts Are
than the advertised request for proposals. Also, the PHA
Questionable
extended a legal contract and without justification changed
the method of payment. The PHA contends that the
changes in scope of services and method of payment were
recommended by HUD, however the PHA could not
provide supporting documentation to verify this. Therefore,
we consider $17,482.10 in legal costs as unsupported.
We recommend that you take the appropriate actions
Recommendations
against the Board of Commissioners for authorizing the
buyout and that you require the PHA to instruct the
Executive Director to return the buyout payments to the
PHA. Additionally, we recommend that you make a
determination as to the eligibility of the current and future
fees paid to the attorney. Any costs found to be ineligible
should be reimbursed by the PHA from non-Federal funds.
Page iii 96-NY-204-1001
Executive Summary
The results of the audit were discussed with PHA Officials
Exit Conference
during the course of the audit and at an exit conference held
on March 5, 1996 attended by:
PHA Officials
Dominic M. Gallo, Acting Executive Director
Carmen Matarazzo, Assistant Comptroller
James L. Bosworth, PHA General Counsel
HUD - New Jersey State Office Official
Edward DePaula, Acting Director, Office of Public Housing
HUD - Office of Inspector General
William H. Rooney, Assistant District Inspector General
for Audit
Karen A. Campbell, Auditor in Charge
Joseph F. Vizer, Auditor
The Auditee's comments are included as Appendix A to this
report. In addition, the comments have been summarized
and provided after each finding in the report. Where
appropriate, we have prepared an evaluation of the
Auditee's comments.
96-NY-204-1001 Page iv
Table of Contents
Management Memorandum i
Executive Summary iii
Introduction 1
Findings
1 Buyout Arrangement With Executive
Director Was Unnecessary Resulting In
Unreasonable Charges 3
2 PHA Legal Services Contracts Are
Questionable 9
Internal Controls 15
Follow Up On Prior Audits 17
Appendices
A Auditee Comments 19
B Schedule of Unreasonable/Unnecessary
and Ineligible Costs 25
C Distribution 27
Abbreviations
Page v 96-NY-204-1001
Table of Contents
ACC Annual Contribution Contract
CIAP Comprehensive Improvement Assessment Program
CFRs Code of Federal Regulations
CGP Comprehensive Grant Program
HUD U.S. Department of Housing & Urban Development
IA Independent Accountant
OIG Office of Inspector General
RFPs Request For Proposals
96-NY-204-1001 Page vi
Introduction
The PHA is governed by a Board of Commissioners consisting of seven unpaid members who
formulate and direct the PHA's policies and procedures. The Chairman of the Board is Eugene
G. Drayton. Dominic M. Gallo, is the Acting Executive Director responsible for general
management and supervision over the administration of PHA business and affairs.
As of year ended September 30, 1994, the PHA operates 1353 units of Federally-assisted low rent
public housing units under Consolidated Annual Contributions Contract NY-432 and administers
312 units under its Section 8 Program. The PHA received $2,888,406 in operating subsidies and
$5,697,368 in Comprehensive Grant Program (CGP)/Comprehensive Improvement Assessment
Program (CIAP) in fiscal year 1994.
The books and records are maintained at the PHA's Management Office, which is located at 400
Harrison Street and at its Rental Collection Office, 221 Jackson Street, in Hoboken, New Jersey.
The audit objectives were to determine whether the PHA
Audit Objectives
complied with HUD's requirements and policies pertaining
to:
• personnel practices,
• procurement,
• maintenance and
• housing quality standards.
The audit covered the period from October 1, 1993 through
Audit Scope and
June 30, 1995. However, we reviewed activity prior and
Methodology
subsequent to the audit period as necessary through
December 31, 1995. The audit site work was conducted
from July 25, 1995 through January 26, 1996.
To accomplish our audit objectives, interviews were
conducted with HUD, State Office, and PHA officials. We
evaluated the PHA's organizational structure and reviewed
the PHA's policies and procedures for managing overall
operations. Also, audit procedures included an examination
of records and files. In addition, we performed detailed
audit testing of selected transactions in the areas reviewed.
The audit was conducted in accordance with generally
accepted government audit standards.
Page vii 96-NY-204-1001
Introduction
A copy of this report has been provided to the PHA's
Acting Executive Director.
96-NY-204-1001 Page viii
Finding 1
Buyout Arrangement With Executive Director
Was Unnecessary Resulting in Unreasonable
Charges
In January 1995, the PHA paid its Executive Director $171,476.42 in excess of his annual salary
to buyout the last nine months of his five year employment contract that would have ended in
September 1997. According to the PHA commissioners, the PHA was concerned about the
Executive Director's health; therefore, they agreed to buyout his contract and retain his expertise
by moving him to a less stressful position. However, one year after the buyout, he was still
functioning as the Executive Director. In our opinion, the buyout payments were unnecessary and
unreasonable charges to the low-rent housing program. Therefore, we question the entire buyout
arrangement and the applicable payments.
Part 85 of Title 24, Code of Federal Regulations requires
Criteria
Public Housing Authorities to follow Office of
Management and Budget Circular A-87, Costs Principles
for State and Local Governments. This Circular, specifically
Attachment A, provides that costs must be necessary and
reasonable in order to be charged to a program.
On October 1, 1992, the PHA entered into a five year
PHA enters into five year
employment contract with the Executive Director that
employment contract
would have ended on September 30, 1997.
On March 17, 1994, the Board of Commissioners passed a
resolution which amended the Executive Director's
employment contract and provided compensation upon
termination. Specifically, the resolution said that the
Executive Director would be paid salary and benefits from
the date of termination to the end of his contract period.
On December 15, 1994, the Board of Commissioners
passed a resolution stating that the PHA agreed to purchase
the last nine months of the Executive Director's contract
(January 1, 1997 through September 30, 1997). The PHA
would make immediate payments based upon the current
wage structure and fringe benefits.
Page 3 96-NY-204-1001
Finding 1
In January 1995, the PHA paid the Executive Director the
following amounts totalling $171,476.42:
-- $84,284.84 Salary payments for the period January 1,
1997 through September 30, 1997.
-- $8,108.63 Annual leave payments that the Executive
Director would have accrued between January 1, 1997
and September 30, 1997.
-- $56,330.37 Annual leave payments for leave that the
Executive Director accrued as of December 31, 1994.
-- $22,752.58 Sick leave payments for leave that the
Executive Director accrued as of December 31, 1994.
The Newark Office Housing Specialist responsible for
Discussion with HUD
assisting this PHA recalls discussing the five year
Officials
employment contract with a PHA representative, but it was
never formally approved as required by the Annual
Contribution Contract (ACC).
The Newark Office, Director of Public Housing said that he
was not aware of this five year employment contract. He
quoted Section 315 of the ACC, which provides that the
PHA should not enter into any management agreement
when the initial period is in excess of two years, unless
prior written consent is obtained from HUD. The Director
explained that he has never approved an employment
contract that exceeded two years, much less a five year
employment contract.
More importantly, neither the Housing Specialist nor the
Director of Public Housing were aware that the
commissioners passed a resolution amending the
employment contract entitling the Executive Director to a
buyout. Furthermore, they were not aware of any monies
paid to the Executive Director much less the magnitude of
the monies paid.
The Director of Public Housing explained that buyouts may
be eligible; it would depend upon the terms of the buyout
and the reason to execute a buyout provision. For example,
if the PHA desired to buyout the last month or two of an
96-NY-204-1001 Page 4
Finding 1
employment contract, depending upon the circumstances
regarding the need for the buyout, he probably would not
object. Finally, the Director said that in this situation the
buyout was unnecessary and unreasonable.
In December 1995, we discussed the buyout with the
Discussion with PHA
commissioners who authorized the buyout payments. The
Commissioners
commissioners explained that in March 1994, the Executive
Director told them that he was not healthy and the that job
was too stressful. Subsequently, he suggested that the
commissioners appoint a temporary Executive Director.
Also, he suggested that a new position (Reorganization
Officer) be created and that he be selected for this position.
According to the commissioners, as Reorganization Officer,
he would make suggestions to the PHA regarding cost
effectiveness.
The commissioners said during their December 1994,
meeting, the Executive Director indicated that he was
having occasional chest pains; therefore, he requested that
his contract be bought out and that he become the
Reorganization Officer. The commissioners agreed because
they believed that he was doing a good job and that they
desired to keep his expertise at the PHA.
In January 1995, according to the commissioners, they
bought out the last nine months of the Executive Director's
contract, moved him to the Reorganization Officer position
and appointed an Acting Executive Director. However, the
newly appointed Acting Executive Director died three
weeks later. Therefore, the prior Executive Director
assumed the functions of the Executive Director. However,
one year after the buyout, he was still functioning as the
Executive Director. We asked the commissioners why.
They said that they desired to promote from within the
PHA, but they have not been successful. It should be
mentioned that during our field work, we did not observe
the PHA actively recruiting another Executive Director and
the Commissioner agreed that they were not actively
seeking a new Executive Director.
We attempted to determine how the PHA was able to fund
Funds received from
a buyout of this magnitude. We found that in 1989, Public
local electric company
Service Gas & Electric, the local electric company, needed
Page 5 96-NY-204-1001
Finding 1
access to PHA land. As part of the electric company's standard business practice, it paid the
PHA $175,000 for easement rights. In 1990, the monies were put into an escrow fund
because of discrepancies that arose during a title search. In early January 1995, these
discrepancies were resolved and the monies were deposited into the PHA's general fund.
When we asked the Executive Director about the source of funds from which the PHA paid
the buyout, he responded that it came from the Public Service Gas & Electric funds
mentioned above and that he considered these non-Federal funds. We discussed this issue
with a HUD attorney who advised that once non-Federal funds are co-mingled with Federal
funds, the monies are considered Federal funds.
The OIG defines unnecessary costs as costs which are not
The buyout is
generally recognized as ordinarily, prudent, relevant and/or
unnecessary and
necessary within established practices. Likewise the OIG
unreasonable
defines unreasonable costs as costs which by their very
nature and amount, exceed the costs incurred by the
ordinarily prudent person in the conduct of a competitive
business.
We believe that the buyout arrangements and the applicable
payments are unnecessary and unreasonable for the
following reasons:
• In January 1995, the commissioners created the
Reorganization Officer position for the Executive
Director because the Executive Director position was
too stressful. However, he was to continue to receive the
$112,380 annual salary that was budgeted for the
Executive Director position. In short, there was no
corresponding reduction in salary for a position with
less responsibility.
• The PHA did not identify the duties of the
Reorganization Officer. There were hand written notes
which the Executive Director presented to the
commissioners with some suggestions as to how he
could save the PHA money.
• In December 1994, the Executive Director presented the
Reorganization Officer idea to the commissioners.
However, in July 1994 and May 1995 when the PHA
submitted its original and revised budgets this position
was not listed.
96-NY-204-1001 Page 6
Finding 1
• The PHA's Personnel Policies dated April 1987, provide
that an individual is entitled to accumulate a maximum
of 50 vacation days. Therefore, upon leaving
employment with the PHA, an individual could be
reimbursed for a maximum of 50 vacation days. As
part of this buyout the PHA paid the Executive Director
for 130 days.
• The Personnel Policies dated April 1987, provide that
the maximum compensation to be paid by the PHA for
sick leave was $15,000. As part of the buyout the PHA
paid the Executive Director $22,752.58.
• The Executive Director position was believed to be too
stressful; therefore, his contract was bought out. Yet one
year after the buyout, he was still functioning as the
Executive Director and the commissioners have not
been actively searching for another Executive Director.
• According to the commissioners, the PHA bought out
the last nine months of the Executive Director's contract
(January 1, 1997 through September 30, 1997) because
in January 1997, he would have sufficient years to
receive a civil service retirement. Also, the
commissioners desired to keep the Executive Director
at the PHA in another position because of his expertise.
In our opinion, if the commissioners desired to retain
the Executive Director at the PHA they could have
transferred him to another job until January 1997
without buying out his contract.
• For the year ended September 30, 1995, the Executive
Director received $171,476.42 as a result of the buyout
out, plus his annual salary of $112,380 for
compensation totalling $283,856.42. We believe that
this an unreasonable amount for a PHA to compensate
an employee.
In summary, the low-rent housing program must be
managed in the most economical manner. Therefore, we
believe that payments of this magnitude to buyout an
employment contract are unnecessary and unreasonable
charges to the low-rent housing program. In addition, we
believe that the commissioners exercised poor judgement
Page 7 96-NY-204-1001
Finding 1
when it approved the buyout arrangements and authorized
the payments.
Auditee Comments The PHA provided a detailed explanation of this finding
and it is included in its entirety as part of Appendix A to
this report. Generally, the response provides that HUD was
made aware of the five year contract, amendments to the
contract, the buyout and its source of funding through
Board minutes and resolutions forwarded to HUD. As for
the funding source of the buyout, the easement
compensation was not federal funds.
OIG Evaluation of HUD Field Office personnel simply do not have the time to
Auditee Comments read all the Board of Commissioner minutes and resolutions
sent to them. Furthermore, as mentioned in the finding,
Section 315 of the ACC requires the PHA to obtain written
consent from HUD for any management or personnel
services contracts that exceed two years. This was not
done.
The funds from the sales of the easement were deposited
into the PHA's General fund. According to the HUD Field
Office attorney, once funds are deposited into the General
Fund, the funds are considered Federal funds.
Recommendations We recommend that you:
1A. Require the PHA to instruct the Executive Director
to return the buyout payments to the PHA.
1B. Take the appropriate action against the Board of
Commissioners for authorizing the buyout.
96-NY-204-1001 Page 8
Finding 2
PHA Legal Services Contracts Are
Questionable
The PHA awarded a legal service contract that had a different scope of services and different
method of payment than its advertised request for proposals (RFP). Also, the PHA extended a
legal contract for six months and without justification changed the method of payment from an
hourly rate to a retainer basis. A PHA official said that the changes in the scope of services and
the changes in methods of payment were recommended by the HUD attorney; however, the
official could not provide any documentation to verify this. Therefore, we consider $17,482.10
in legal costs as unsupported pending a HUD eligibility determination.
Title 24, Code of Federal Regulations (CFRs) Part 85.36
Criteria
provides that all procurement transactions will be
conducted in a manner providing full and open competition.
HUD Handbook 7460.8 REV-1, Procurement Handbook for
PHAs, Chapter 4 provides that the procurement of legal
services should follow the competitive proposal method
identified in Part 85.36(d) of the CFRs. According to
Paragraph 4-25 of this Handbook, contracts shall be
awarded only in accordance with the terms of the RFP.
Furthermore, Paragraph 4-21 provides that if changes in the
RFP are needed, a written amendment should be issued by
the PHA. If the change is substantial the RFP should be
canceled and a new RFP issued.
Our review objectives included a determination whether
legal services were obtained in compliance with
procurement standards. Therefore, we examined the method
of procurement used by the PHA to contract for legal
services and we examined the contracts and billings related
to the scope of services.
On January 31, 1995 and February 10, 1995, the PHA
PHA requests legal
advertised a RFP for legal services. The PHA requested an
services
attorney for a one year period to review legal matters which
Page 9 96-NY-204-1001
Finding 2
would arise in connection with the business and management of the PHA's various housing
programs.
The scope of legal services requested encompassed the
PHA's ordinary business. The services to be provided were
as follows:
(A) Attendance at all PHA meetings and legal
supervision of the PHA's minutes;
(B) Attendance at committee meetings when requested;
(C) Confer with and advise the officers, employees and
members of the PHA on legal matters, when
requested;
(D) Advise and assist the PHA in the preparation of all
legal documents, papers, contracts, specifications,
bonds, waivers, and other legal drafting when
required;
(E) Appear for the PHA in all routine litigation;
(F) Approve the legality of contracts;
(G) Handle all legal questions and matters arising under
contracts of the PHA and render legal opinions on
all matters submitted by the PHA;
(H) Give notice to and consult with the PHA's insurance
carriers in all cases of injury to person or property
involving the PHA; and
(I) Review and approve all documents pertaining to
temporary and permanent financing of the PHA's
projects covered by this agreement.
The RFP required that all qualified candidates interested in
submitting a proposal for legal services submit a written
proposal based upon an hourly rate .
Our review noted that the PHA received two proposals in
Two proposals submitted
response to the RFP. One proposed to charge the PHA at
in response of RFP
a rate of $115.00 per hour with an annual fee not to exceed
96-NY-204-1001 Page 10
Finding 2
$25,000 per year. The scope of legal services to be performed encompassed the exact scope
of services outlined in the RFP.
The second proposal, received from the PHAs' attorney for
the past 18 years, was in two parts. In the first part, the
attorney offered to represent the PHA for standard PHA
contractual work at the rate of $115.00 per hour with an
annual fee not to exceed $25,000. In the second part, the
attorney offered that if the PHA required legal services
related to the Comprehensive Grant Program
(CGP)/Comprehensive Improvement Assessment Program
(CIAP) the rate would be $115.00 per hour with an annual
fee not to exceed $25,000. In short, there were two parts to
the proposal, each part had a maximum annual fee of
$25,000.
On April 1, 1995, the PHA awarded its attorney for the past
PHA did not award legal
18 years a legal services contract for a one year period
services contract in
ending March 31, 1996. This contract provided for an
accordance with RFP
annual fee of $50,000 payable in twelve equal installments.
The contract provided for two components with separate
billings:
General Counsel at $25,000.
CIAP/CGP at $25,000.
According to a PHA official, the contract provisions were
verbally recommended by the HUD attorney; however, the
official was unable to provide any documentation to verify
this.
Our review determined that the RFP asked for an hourly
rate pertaining to legal matters for the various housing
programs. Therefore, in our opinion the contract was not
awarded in accordance with the RFP. Specifically, the PHA
awarded the contract based upon 12 monthly equal
installments when the RFP asked for an hourly rate. Also,
the RFP asked for legal services pertaining to various
housing programs; however, the PHA awarded the contract
in two components: general counsel and CIAP/CGP. We
believe that the CIAP/CGP should have been included as
part of the various housing programs and not as a separate
component.
Page 11 96-NY-204-1001
Finding 2
Our review disclosed that for a seven month period ending
October 31, 1995, the PHA paid the attorney a total of
$29,166.62 in equal monthly installments of $4,166.66.
However, our review of the attorney's billing determined
that he worked a total of 135.4 hours during this period. In
our opinion, if the PHA had awarded the contract based
upon an hourly rate as requested in the RFP and used the
$115.00 hourly rate that was included in the attorney's
proposal, only $15,571 would have been charged to the
PHA (135.4 X $115.00 ). Therefore, we consider
$13,595.62 as unsupported legal costs ($29,166.62 minus
15,571) pending a HUD eligibility determination.
The PHA entered into a contract for legal services for a one
PHA extended legal
year period ending September 30, 1994. The contract
contract
provided for a fee based upon an hourly rate of $115.00
with a maximum not to exceed of $25,000.
On October 13, 1994, the PHA's Board of Commissioners
passed Resolution No. 5518 authorizing the extension of
the legal services contract on a month to month basis until
a committee reviewed the professional services
procurement policy and recommended revisions to the
policy. Our review determined that the PHA extended the
contract for six months ending March 31, 1995.
Our review of attorney's billings for the original contract
determined that for the one year period prior to the
extension of the contract, the PHA paid the attorney
$21,835.50 ( $115.00 per hour for general counsel and
$65.00 per hour for associate counsel).
However, our review of the six month extension ending
March 31, 1995, disclosed that the PHA did not pay for
legal services in accordance with the terms of the original
contract. Specifically, in six monthly installments, the PHA
paid the attorney a total of $12,499.98. In short, the PHA
switched from an hourly rate to a $2,083.33 monthly
retainer. Again the PHA official said that the HUD attorney
recommended this arrangement, but the official could not
provide any documentation to verify this. In our opinion,
the payments for the extended six months should have
continued at the rate determined in the original contract
96-NY-204-1001 Page 12
Finding 2
($115.00 per hour for general counsel services) and not
switched to the retainer basis.
From the attorney's billings, we determined that during this
six month extended period, the attorney charged 74.90
hours for general counsel services at $115.00 per hour
amounting to $8,613.50. The difference between the
amount that the PHA actually paid for legal services
($12,499.98) and the amount it should have paid
($8,613.50) equals $3,886.48. Therefore, as a result of
switching from the hourly rate to the retainer basis, we
believe that the PHA paid excessive legal costs amounting
to $3,886.48.
Auditee Comments The PHA provided an explanation to this finding and its is
included in its entirety as part of Appendix A to this report.
Generally, it provides that as a result of the New Jersey
Strike Force that the RFP was interpreted to mean an annual
retainer supplemented by an hourly billing for monitoring
purposes. The PHA official said that this interpretation was
obtained from HUD counsel. Also, when the 1993-1994
contract had to be extended the PHA extended it, an annual
retainer concept because it was recommended by HUD.
OIG Evaluation of Our discussion with HUD Field Office counsel indicated
Auditee Comments disagreement. Therefore, we recommended that the Field
Office make a determination on the eligibility of the
attorney fees.
Recommendations We recommend that you:
2A. Make a determination as to the eligibility of the
current and future fees paid to the attorney. Any
costs found to be ineligible should be reimbursed by
the PHA from non-Federal funds.
Page 13 96-NY-204-1001
Finding 2
2B. Instruct the PHA to comply with the provisions of
24 CFR Part 85.36 to ensure that procurement of all
future professional services is conducted in a
manner providing for full and open competition.
96-NY-204-1001 Page 14
Finding 2
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Page 15 96-NY-204-1001
Internal Controls
In planning and performing our audit, we evaluated the internal controls of the Project to
determine our auditing procedures and not to provide assurance on internal controls. Internal
controls are the process by which an entity obtains reasonable assurance as to achievement of
specific objectives. Internal controls consist of interrelated components, including intergrity,
ethical values, competence, and the control environment which includes establishing objectives,
risk assessment, information systems, control procedures, communication, managing change, and
monitoring.
We determined the following internal control categories
Relevant Controls
were relevant to our audit objectives:
• Controls over cash receipts and disbursements.
• Controls over petty Cash and change funds.
• Controls over accounts receivables and security
deposits.
• Controls over payroll.
• Controls over investments.
• Controls over general accounting and
administrative controls.
We evaluated all the relevant control categories identified
Internal Controls
above by determining the risk exposure and assessing
Assessed
control design and implementation.
A significant weakness exists 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, the following controls have
Assessment Results
significant weaknesses:
Controls over payroll (Finding 1).
Page 15 96-NY-204-1001
Internal Controls
Controls over general accounting and administrative
controls (Findings 1 and 2).
96-NY-204-1001 Page 16
Follow Up On Prior Audits
The latest audit of the PHA was performed by the Independent Auditor (IA) Polcari & Company,
for the twelve month period ended September 30, 1994. The report contains two
recommendations pertaining to the PHA's Drug Enforcement Project. At the completion of our
audit field work, all of the recommendations had been resolved.
Page 17 96-NY-204-1001
Follow Up On Prior Audits
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96-NY-204-1001 Page 18
Appendix B
Schedule of Unnecessary/Unreasonable and
Unsupported Costs
Finding Unnecessary/
Number Unreasonable (1) Unsupported (2)
1 $171,476.42
2 $17,482.10
(1) Unnecessary/
Unreasonable Costs - Unnecessary costs are those which are not generally
recognized as ordinary, prudent, relevant, and/or
necessary within established practices. Unreasonable
costs exceed the costs that would be incurred by the
ordinarily prudent person in the conduct of a competitive
business.
(2) Unsupported Costs - Costs not clearly eligible or ineligible but which warrant
being contested. These costs require future decision by
HUD program officials. This decision may involve legal
interpretation or clarification of applicable policies and
regulations.
Page 25 96-NY-204-1001
Appendix B
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96-NY-204-1001 Page 26
Appendix C
Distribution
Director, Public Indian Housing, (2)
(Acting) Secretary Representative, AS
Director, Accounting Division, 2AAF
Audit Liaison Officer, New Jersey State Office, (3)
(Acting) Director, Office of Public Housing, 2APH
Assistant to the Deputy Secretary for Field Management, SDF,(Room 7106)
Deputy Assistant to the Secretary, SLD (Room 7118)
Office of Assisted Housing, PH (Attention: Comptroller/Audit Liaison Officer, Room 4204) (3)
Acquisitions Librarian, Library, AS (Room 8141)
(Acting) Chief Financial Officer for Operations,F (Room 10166)(2)
Deputy Chief Financial Officer, FF (Room 10166) (2)
Associate General Counsel, Office of Assisted Housing & Community Development, CD (Room
8162)
Assistant Director In Charge, US GAO, 820 1st Street NE, Union Plaza, Building 2, Suite 150,
Washington, DC 20002 (2)
Executive Director, Housing Authority of the City of Hoboken,
Hoboken, New Jersey
Page 27 96-NY-204-1001
HA of the City of Hoboken, Hoboken, NJ
Published by the Department of Housing and Urban Development, Office of Inspector General on 1996-03-13.
Below is a raw (and likely hideous) rendition of the original report. (PDF)