oversight

Camden HA, Camden, NJ

Published by the Department of Housing and Urban Development, Office of Inspector General on 1996-07-24.

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

                                                                           Issue Date

                                                                                July 24, 1996
                                                                           Audit Case Number

                                                                                96-NY-204-1004




TO:             Carmen F. Valenti, Director, Office of Public Housing,
                                               New Jersey State Office


FROM:           A. Paul Kane, District Inspector General for Audit,
                                        New York/New Jersey

SUBJECT:        Camden Housing Authority
                Low-Rent Housing Program
                Camden, New Jersey


Pursuant to a request from the New Jersey State Office of Public Housing, we completed an audit
of the Camden Housing Authority, herein referred to as the Public Housing Authority (PHA)
pertaining to its Federal Low-Rent Housing (LRH) program. The purpose of the audit was to
determine the adequacy of the PHA's internal controls for safeguarding cash and other assets, and to
determine whether the PHA complied with the terms and conditions of the Annual Contributions
Contract (ACC) and other applicable U.S. Department of Housing and Urban Development (HUD)
regulations and requirements. The audit covered the period from January 1, 1993 through March 31,
1995, and was extended where appropriate to include other periods. The audit field work was
performed from April 10, 1995 through February 22, 1996.

The audit disclosed that while the Executive Director is working diligently to obtain training for the
staff to improve their performance, we believe that a stronger commitment is needed by the Board
of Commissioners to ensure that the deficient administration and operating deficiencies discussed in
the findings of this report are addressed and that proper accountability and control over its assets and
daily operations are maintained.

This report contains 13 findings. The findings show that the PHA's administrative policies, practices
and procedures did not always comply with applicable HUD regulations and requirements pertaining
to its LRH program. To ensure compliance, the PHA needs to: (a) improve its administration of
HUD programs; (b) ensure that the system for procurement and contracting comply with HUD and
its own requirements; (c) improve its monitoring of subgrantees for the Drug Elimination program;
(d) comply with approved staffing levels; (e) ensure the propriety of payments for unused vacation
time and for overtime; (f) control the use of gasoline by its personnel; (g) ensure that costs are eligible
and properly supported prior to incurrence; (h) improve its administrative controls and its controls
over inventory and the leasing of vehicles, and (i) ensure that travel and conference costs are
economical and in accordance with established policy. These weaknesses have caused ineligible costs
of $37,648.43 and unsupported costs of $1,782,783.66 to be incurred.
Management Memorandum



Within 60 days, please furnish this office, for each recommendation cited in this report, a status report
on: (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 William H. Rooney, Assistant District
Inspector General for Audit, at 212-264-8000, ext. 3978.




96-NY-204-1004                                    Page ii
Executive Summary
We performed an audit of the Camden Housing Authority (herein referred to as the Public Housing
Authority (PHA) pertaining to its Federal Low-Rent Housing (LRH) program. The primary objective
of the audit was to evaluate internal controls for safeguarding cash and other assets, and to determine
whether the PHA complied with the terms and conditions of the Annual Contributions Contract
(ACC) and other applicable HUD regulations and requirements.

The audit disclosed that the PHA generally did not comply with program requirements, and
regulations pertaining to its LRH program. Decent, safe and sanitary housing has not generally been
provided tenants and the PHA has not timely administered HUD programs. In addition, the inefficient
and uneconomical use of funds has deprived the housing programs of needed revenues. In an attempt
to improve the PHA's operations, the New Jersey State Office issued a Limited Denial of Participation
to the former Chairwoman and HOPE VI Program Administrator. This action was intended to send
a message that officials will be held accountable for their actions. In addition, the State Office has
initiated biweekly meetings with the PHA. Nonetheless, we believe that if the PHA is going to
improve its operation, HUD needs to modify the current form of management. Accordingly, we
recommend that HUD consider one of three available options. They are: (1) joint management
consisting of the existing PHA administration and HUD, (2) appointment of a third party to manage
the PHA, or (3) take over of the PHA by HUD.




The results of our audit are discussed in the findings of this report and are summarized below.

                                       1.      The PHA has not provided tenants with decent, safe
                                               and sanitary housing as required by the National
                                               Housing Act

                                               In 1994 and 1995 HUD provided the PHA nearly $31
                                               million in various subsidies and grants to help in its
                                               operations. In addition, during 1994 HUD awarded a
                                               $42.1 million HOPE VI Urban Revitalization
                                               Demonstration (URD) grant for the revitalization of
                                               McGuire Gardens. In spite of more than $73 million
                                               HUD funding, living conditions of the tenants have not
                                               noticeably improved, particularly at the family type
                                               developments. The unsightly conditions of the
                                               grounds, buildings and common areas and the fact that
                                               most of the inspected units did not meet the minimum
                                               Housing Quality Standards (HQSs) are evidence that
                                               the PHA is not providing housing that is suitable for
                                               the tenants.




                                                Page iii                                  96-NY-204-1004
Executive Summary



                         While this finding discusses the failure of the units we
                         inspected to meet HQSs and the unacceptable
                         conditions of the building exteriors, common areas and
                         grounds along with the poor administration and lack of
                         progress of the Comprehensive Grant Program (CGP),
                         Vacancy Reduction Program (VRP), Drug Elimination
                         Program (DEP) and the HOPE VI URD Program, the
                         remaining 12 findings deal with inefficient and
                         sometimes wasteful practices of the PHA. The
                         inefficient and sometimes wasteful practices include:
                         1) improper procurement and contracting procedures,
                         2) poor monitoring of the Drug Elimination Program
                         and Youth Sports Program that the City of Camden
                         administers, 3) improper hiring and salary increases, 4)
                         improper vacation and overtime payments, 5)
                         improper contracting for a Parking Study, 6) lack of
                         control over gasoline purchases and travel costs, and
                         7) various other ineligible costs and administrative
                         deficiencies.

                         These deficiencies occurred because the former
                         Chairwomen and the Board did not always operate
                         the PHA in the interest of the tenants. Recently, the
                         former Chairwoman and HOPE VI Program
                         Administrator were issued a Limited Denial of
                         Participation by the State Office. We believe this
                         action by HUD was the first positive action that needs
                         to be taken if the PHA is going to improve its
                         operation. A continuation of the status quo will
                         produce no meaningful improvement; therefore, HUD
                         needs to modify the management of the PHA.
                         Accordingly, we recommend that one of three options
                         to the current form of PHA management be
                         considered. They are:

                         (1) Joint management consisting of the existing PHA
                             administration and HUD,
                         (2) Appointment of a third party to manage the PHA,
                             or
                         (3) Take over of the PHA by HUD.


                    2.   The PHA has not complied with its own procurement
                         policy or with HUD regulations and requirements


96-NY-204-1004            Page iv
                                       Executive Summary



     For procurement and contracting, the PHA has neither
     complied with its own procurement policy nor with
     HUD regulations and requirements. Some of the
     noncompliances include: (1) Request For Proposal
     (RFP) was received after the expiration date; (2)
     procurements were made where no quotes were
     requested; and (3) instances where costs were not
     adequately supported.       The deficiencies and
     noncompliances are attributed to internal influences
     and oversight by staff in the review process. As a
     result, assurance that the related procurement and
     contract costs were proper and reasonable has been
     diminished and the PHA has incurred costs of
     $733,391.57 that are unsupported.

3.   The PHA has not adequately monitored Subgrantees
     under the Drug Elimination Program

     The PHA was awarded Drug Elimination Program
     (DEP) grants of $250,000 in 1990 and $466,600 each
     for years 1991, 1992 and 1993. The City of Camden,
     Department of Community Services, acted as
     Subgrantee for the PHA and incurred costs under the
     program. Our review of the costs showed various
     deficiencies occurred because procedures were not
     established to ensure adequate monitoring of
     Subgrantees. Consequently, not only has assurance
     that program objectives were met been diminished; but
     the PHA has lessened its assurance that program funds
     were properly safeguarded against waste and loss. As
     a result, ineligible and unsupported costs of $5,472.14
     and $607,834.60, respectively, were charged to the
     program.

4.   Improper hiring and salary increases

     Despite HUD having informed the PHA not to exceed
     the staffing levels identified in the approved budget,
     between October 1992 and December 1995, the PHA
     added at least six positions that were not previously
     included in the approved budgets. PHA officials
     stated that the excess staffing occurred because the
     former Chairwoman recruited the individuals and
     directed they be hired. Also during the period, the


      Page v                                   96-NY-204-1004
Executive Summary



                         former Chairwoman recruited and directed the hiring
                         of another 13 individuals who were placed in positions
                         that had already been approved by HUD. By directing
                         the PHA to hire the individuals, which included known
                         poor performers, we believe the former Chairwoman
                         created an appearance of favoritism. In addition,
                         during 1994 and 1995, the PHA also violated HUD
                         requirements by providing salary increases that were
                         not included in the budget and/or not justified. PHA
                         officials advised that the increases were made at the
                         direction of either the former Chairwoman or the
                         Executive Director. As a result, we consider the
                         salary costs totalling $219,373 to be unsupported
                         pending a HUD eligibility determination.

                    5.   Improper vacation and overtime payments

                         Contrary to requirements, the PHA compensated
                         employees for unused vacation leave and overtime.
                         Specifically, the PHA was required by law and union
                         contract to cancel any vacation leave in excess of what
                         each employee was allowed to carry into 1995.
                         Instead, the Executive Director authorized the PHA to
                         use $65,031 in 1994 operating funds to compensate
                         employees for unused vacation leave. The Executive
                         Director told us that the PHA's past practice of
                         unlimited leave accumulation had resulted in
                         significant employee leave balances. While the
                         Executive Director was aware of the requirements to
                         cancel excess leave, he felt compelled to compensate
                         employees to avoid litigation based upon past practice.
                         Further, the Executive Director authorized $6,200 in
                         overtime compensation to supervisory administrative
                         employees. The Executive Director told us that while
                         he realized that administrative staff do not qualify to
                         receive overtime compensation, he had authorized
                         overtime compensation to be paid as a bonus because
                         staff had worked overtime in pursuit of certain goals.
                         We consider the overtime compensation to be
                         improper based on: (1) the Federal Fair Labor
                         Standards Act provision which relieves the PHA from
                         any statutory requirement to compensate executive,
                         professional, and administrative employees for
                         overtime, and (2) the lack of any HUD or PHA


96-NY-204-1004            Page vi
                                       Executive Summary



     provision to authorize overtime. Accordingly, we
     consider the $71,231 in total vacation leave and
     overtime compensation as unsupported.

6.   Unnecessary costs may have been incurred

     The PHA may have incurred costs that were not
     necessary by HUD requirements. The costs were
     incurred for a parking study to be conducted at the
     various housing projects. Internal assertions may have
     influenced the actual procurement of the study.
     However, the need for the study was not planned and
     was not included in the approved operating budget.
     As a result, the cost of the study is considered to be
     unsupported pending a HUD eligibility determination.

7.   The administration of the Youth Sports Program
     needs improvement

     The PHA, as Grantee, was awarded a Youth Sports
     Program grant of $125,000 on May 4, 1992. The City
     of Camden, Department of Community Services, was
     the Subgrantee who incurred program costs. Our
     review of the costs charged to the program showed
     various deficiencies that indicate a lack of proper
     monitoring by the PHA. The deficiencies occurred
     because controls were not established to ensure
     adequate monitoring of the Subgrantee. Hence,
     assurance that program objectives were met has been
     diminished and the PHA has lessened its assurance that
     program funds are properly safeguarded against waste
     and loss. As a result, ineligible and unsupported costs
     of $15,555.55 and $39,998.94, respectively, were
     charged to the program.



8.   Lack of control over gasoline purchases

     Because the PHA did not implement procedures to
     control the purchase of gasoline from the City by its
     employees, unsupported gasoline costs of $14,506
     were incurred and a cost efficiency of $33,239.46 is
     claimed. The weaknesses in controlling the purchase


      Page vii                                 96-NY-204-1004
Executive Summary



                          of gasoline by employees is partly attributed to the
                          PHA's belief that the City's controls over its system
                          were adequate.

                    9.    Inadequate control over the disbursement of project
                          funds

                          The PHA's Finance Department did not maintain
                          adequate control over the disbursement of project
                          funds as required by the terms and conditions of the
                          ACC and OMB Circular A-87. The controls are
                          inadequate because no procedures were established to
                          ensure that costs are eligible and properly supported
                          prior to incurrence. As a result, the PHA has charged
                          its LRH program with ineligible and unsupported costs
                          totaling $5,765.61 and $21,511.49 respectively.

                    10.   Car lease costs may not have been necessary

                          The PHA incurred costs in our opinion that were not
                          necessary and/or reasonable. The costs were incurred
                          to lease three new vehicles; two for PHA officials and
                          one for the Apartment Turn Over (ATO) crew. The
                          vehicles were leased because the former Chairwoman
                          directed they be leased. As a result, the costs
                          amounting to $19,648.06 are considered to be
                          unsupported pending an eligibility determination.

                    11.   Travel costs violate prescribed requirements

                          Throughout the audit period, the PHA paid for travel
                          costs that violated not only the terms and conditions of
                          the ACC, but the provisions of its own policy as well.
                          The violations occurred because the officials
                          responsible for administering travel disregarded the
                          requirements. As a result, the PHA has charged its
                          LRH program with ineligible and unsupported travel
                          costs totaling $10,855.13 and $5,289 respectively.

                    12.   Inventory controls need improvement

                          The PHA has not established controls to ensure that
                          assets are properly recorded and controlled as required
                          by the ACC. Consequently, equipment is not properly


96-NY-204-1004            Page viii
                                                           Executive Summary



                         accounted for and is susceptible to theft and/or
                         unauthorized use. We attributed the weaknesses in
                         controls over inventory to the lack of written policies
                         and/or procedures related to the accountability and
                         safeguarding of assets.

                  13.    Administrative controls are inadequate

                         Our review showed various noncompliances pertaining
                         to administrative controls and procedures that have
                         weakened the PHA's system of internal control. The
                         noncompliances occurred because procedures and/or
                         practices were not implemented to ensure that
                         adequate administrative controls were executed to
                         meet program requirements. As a result, the PHA
                         does not have assurance that funds are properly
                         safeguarded against waste and loss and that its housing
                         programs are administered in accordance with Federal
                         regulations and requirements.

                  As part of each finding, we have recommended certain actions
Recommendations
                  which we believe will correct the problems discussed in the
                  findings and strengthen the overall administration of the LRH
                  program.

                  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 June 27, 1996, attended by:

                  PHA Officials

                  Santiago Ilarraza, Chairman, Board of Commissioners
                  Gregory Adkins, Commissioner
                  Benjamin J. Quattlebaum, Executive Director


                  HUD - New Jersey State Office Officials

                  Diane Johnson, New Jersey State Coordinator
                  Edward De Paula, Acting Director, Office of
                             Public Housing

                  HUD - Office of Inspector General



                           Page ix                                  96-NY-204-1004
Executive Summary



                    William H. Rooney, Assistant District Inspector General
                               for Audit
                    Thomas Cosgrove, Senior Auditor
                    Richard Roseboom, Auditor
                    Daniel Schultz, Auditor
                    Michael Zaccaria, Auditor

                    The PHA disagreed with our recommendation shown in
                    finding 1. Specifically, it is the PHA's position that the finding
                    contains no substantial supportive documentation to conclude
                    that the overall living conditions for residents have not
                    improved or that they are unsuitable. We disagree and remind
                    the PHA that: (1) most of the inspected units did not meet the
                    minimum HQS; (2) the unsightly conditions of the grounds,
                    buildings and common areas, and (3) the poor administration
                    and lack of progress on its housing programs substantially
                    support and document that tenant living conditions have not
                    improved despite the availability of HUD funding.

                    Regarding the recommendations for findings 2 through 13, the
                    PHA generally agreed. However, in some instances, the
                    PHA's comments do not address all of the recommendations.
                    The New Jersey State Office should ensure that all
                    recommendations are addressed during the audit resolution
                    phase.

                    The PHA's comments are included as Appendix F to this
                    report.




96-NY-204-1004               Page x
Table of Contents

Management Memorandum                                               i


Executive Summary                                                 iii


Introduction                                                       1


Findings

    1      The PHA Has Not Provided Tenants With
           Decent, Safe and Sanitary Housing as
           Required by the National Housing Act                    3

    2      Improvements Are Needed in the System
           of Procurement and Contracting                        13

    3      Improvements Are Needed in the Monitoring
           of Subgrantees for the Drug Elimination
           Program                                               25

    4      PHA Exceeded HUD Approved Staffing
           and Provided Unsupported Administrative
           Salary Increases                                      29

    5      Contrary to Requirements Payments for
           Unused Vacation and for Overtime Occurred             35

    6      Questionable Payments for Parking Study               39

    7      Improvements Are Needed in the
           Administration of the Youth Sports

                              Page xi                  96-NY-204-1004
Table of Contents




                 Program                                    41

        8        Lack of Control Over Gasoline Use and
                 Charges                                    45

        9        Ineligible and Unsupported Payments From
                 Operating Account                          49

        10 Questionable Car Lease Costs                     51

        11 Improprieties Associated With Travel and
           Conference Costs                                 55

        12 Need to Improve Controls Over Inventory          59

        13 Need to Improve Administrative Controls          63


Internal Controls                                           69


Follow Up On Prior Audits                                   71


Appendices

        A        Schedule of Ineligible and Unsupported
                 Costs, and Cost Efficiencies               73

        B        Pictures of Deficient Conditions           75

        C        Schedule of Ineligible and Unsupported
                 Drug Elimination Program Costs             81

        D        Schedule of Ineligible and Unsupported

96-NY-204-1004                       Page xii
                                                              Table of Contents




         Payments from Operating Account                                     87

   E     Schedule of Ineligible and Unsupported
         Travel Expenses                                                     91

   F     Auditee Comments                                                    95

   G     Distribution                                                       109


Acronyms
   ACC     Annual Contribution Contract
   CFR     Code of Federal Regulations
   CGP     Comprehensive Grant Program
   DEP     Drug Elimination Program
   HQS     Housing Quality Standard
   HUD     U.S. Department of Housing and Urban Development
   LRH     Low-Rent Housing
   OIG     Office of Inspector General
   OMB     Office of Management and Budget
   PHA     Camden Housing Authority
   RFP     Request for Proposal
   URD     Urban Revitalization Demonstration
   VRP     Vacancy Reduction Program




                                   Page xiii                       96-NY-204-1004
Table of Contents




                    (THIS PAGE LEFT BLANK INTENTIONALLY)




96-NY-204-1004                      Page xiv
Introduction
The PHA was established by an ordinance adopted by the Board of Commissioners on April 20, 1938.
The PHA is governed by a seven member Board of Commissioners. The Board establishes policy and
takes official action as required by State and Federal law. One Commissioner is appointed by the
Governor of New Jersey, and serves at his/her discretion. Another Commissioner is appointed by the
Mayor, for a five year term and five Commissioners are appointed by City Council for staggered five
year terms; one each year. The Executive Director is Benjamin Quattlebaum, who is responsible for
selecting staff and managing the overall day-to-day operations of the PHA. The books and records
are located in the PHA's administrative offices, located at 519 Federal Street, Camden, New Jersey
08103.

The PHA's fiscal year is from January 1, to December 31. The PHA operates nine developments
containing 2,237 units. The developments consist of 1,931 family units and 306 senior units. The
PHA also administers a Turnkey Program consisting of 93 units.

Moreover, two social service programs are administered by the PHA. They are the Drug Elimination
Program and the Youth Sports Program. Both programs focus on drug education, intervention and
prevention strategies and activities.



                                      The primary objective of the audit was to evaluate internal
 Audit objectives, scope
                                      controls for safeguarding cash and other assets, and to
 and methodology
                                      determine whether the PHA complied with the terms and
                                      conditions of the ACC and other applicable regulations and
                                      requirements. Specifically, we evaluated controls and
                                      procedures over equipment; determined whether the PHA
                                      complied with applicable requirements governing procurement
                                      and contracting requirements; evaluated the PHA's personnel
                                      procedures; determined whether costs charged to the PHA's
                                      housing and grant programs were reasonable and eligible;
                                      evaluated procedures and practices relating to PHA travel and
                                      general accounting and administrative controls; and visited
                                      housing developments to determine if any conditions could
                                      potentially have a negative impact on the welfare and safety of
                                      the tenants. In addition, we statistically selected 100 occupied
                                      units and inspected the units to determine if minimum HQSs
                                      were met.

                                      The audit covered the period from January 1, 1993 to March
                                      31, 1995. However, activity prior and subsequent to this
                                      period was reviewed as necessary. The audit field work was
                                      conducted between April 10, 1995 and February 22, 1996.



                                               Page 1                                    96-NY-204-1004
Introduction



                 Audit procedures included examination of records and files,
                 interviews with PHA staff, and development site visits. In
                 addition, the PHA's policies, procedures and practices for
                 managing its operations were reviewed. Detailed audit testing
                 was based primarily on judgmentally or statistically selected
                 samples representative of the transactions in the areas
                 reviewed.

                 A copy of this audit report has been provided to the PHA.

                 The audit was conducted in accordance with generally
                 accepted auditing standards.




96-NY-204-1004            Page 2
                                                                                            Finding 1




   The PHA Has Not Provided Tenants With
 Decent, Safe and Sanitary Housing as Required
          by the National Housing Act

In 1994 and 1995 HUD provided the PHA with nearly $31 million in various subsidies and grants to
help in its operations. In addition, during 1994 HUD awarded a $42.1 million HOPE VI Urban
Revitalization Demonstration (URD) grant for the revitalization of McGuire Gardens. In spite of
more than $73 million of HUD funding, living conditions of the tenants have not noticeably improved,
particularly at the family type developments. The unsightly conditions of the grounds, buildings and
common areas and the fact that most of the inspected units did not meet the minimum Housing
Quality Standards (HQSs) are evidence that the PHA is not providing housing that is suitable for the
tenants.

While this finding discusses the failure of the units we inspected to meet HQSs and the unacceptable
conditions of the building exteriors, common areas and grounds along with the poor administration
and lack of progress of the Comprehensive Grant Program (CGP), Vacancy Reduction Program
(VRP), Drug Elimination Program (DEP) and the HOPE VI URD Program, the remaining 12 findings
deal with inefficient and sometimes wasteful practices of the PHA. The inefficient and sometimes
wasteful practices include: 1) improper procurement and contracting procedures, 2) poor monitoring
of the Drug Elimination Program and Youth Sports Program that the City of Camden administers,
3) improper hiring and salary increases, 4) improper vacation and overtime payments, 5) improper
contracting for a Parking Study, 6) lack of control over gasoline purchases and travel costs, and 7)
various other ineligible costs and administrative deficiencies.

These deficiencies occurred because the former Chairwoman and the Board did not always operate
the PHA in the interest of the tenants. Recently, the former Chairwoman and HOPE VI Program
Administrator were issued a Limited Denial of Participation by the New Jersey State Office. We
believe this action by HUD was the first positive action that needs to be taken if the PHA is going to
improve its operation. A continuation of the status quo will produce no meaningful improvement;
therefore, HUD needs to modify the management of the PHA. Accordingly, we recommend that one
of three options to the current form of PHA management be considered. They are:

   (1) Joint management consisting of the existing PHA administration and HUD,
   (2) Appointment of a third party to manage the PHA, or
   (3) Take over of the PHA by HUD.

 HUD has provided $31
 million in grants and                 While the PHA cannot address the array of social and
 subsidies                             economic problems that confront public housing, it should be


                                                Page 3                                   96-NY-204-1004
Finding 1


     expected to efficiently manage the $31 million in grants and subsidies HUD has provided for the
     past two years. The funding provided consists of the following:


                                   1994                      1995                    Total

  Operating Subsidy             $ 8,102,343              $ 8,893,724              $16,996,067

  Comprehensive Grant
  Program                         5,274,249               4,943,101               10,217,350

  Vacancy Reduction
  Program                                                 1,740,000                1,740,000

  Drug Elimination
  Program                          582,250                   582,250               1,164,500

  Youth Sports Program
                                                             125,000                125,000

  Royal Court - Operating
  Subsidy (Turnkey III)            196,717                   203,856                400,573

      TOTAL                     $14,155,559              $16,487,931             $30,643,490



                                      In addition, during 1994 the PHA was awarded $42.1 million
                                      under the HOPE VI URD Program.

                                      Our review of the PHA's administration of its grant programs
                                      consisted of a physical inspection of the developments, and the
                                      evaluation of its funding for the Comprehensive Grant
                                      Program (CGP); Vacancy Reduction Program (VRP); Drug
                                      Elimination Program (DEP) and the HOPE VI URD Program.
                                      The results of our review for each of the areas are as follows:

                                      Physical Inspections

                                      The PHA was provided over $30 million in 1994 and 1995 by
  75 percent of units do not
                                      HUD to maintain its housing stock. However, our physical
  meet HQS
                                      inspections disclosed that the majority of the units did not
                                      meet the minimum HQS required by HUD.

                                      We inspected 100 occupied units. The units inspected were
                                      statistically selected using random numbers from a universe of
                                      1,917 occupied units as of August 9, 1995. The results of our
                                      inspections disclosed that 75 of 100 units inspected failed the
                                      minimum HQSs.




96-NY-204-1004                                 Page 4
                                                                                Finding 1



                           The results of our site inspections of the 100 occupied units
                           selected are as follows:




                           For the 75 units that failed inspection, we found 197 violations
                           in various categories as shown below:




                           During our review, we determined that the number of
                           violations identified were from zero to seventeen violations
                           per unit. The majority of the reasons for the violations were
                           due to a lack of preventive maintenance as shown below:




                           In 23 instances, involving 10 units, the violations were
                           extremely serious and dangerous. Appendix B pages 1 and 2
                           are examples of the serious violations. Likewise the primary
                           reasons for these violations were a lack of preventive
                           maintenance as shown below.

                           The significant trend observed throughout the PHA was that
                           the building exteriors and common areas along with the
                           grounds required extensive work. Sidewalks and parking lots
                           were also in poor condition and extensive planting of new
                           trees and grass is needed. Appendix B pages 3 and 4 are
                           examples of the poor ground conditions. Also, as part of our
                           review we inspected two vacant units at each of the six family
                           type units. Appendix B page 5 identifies two examples of the
                           debris that we observed at the vacant units.

                              Comprehensive Grant Program
CGP funding not expended
timely


                                    Page 5                                    96-NY-204-1004
Finding 1


     The PHA has lagged in its use of Comprehensive Grant Program (CGP) funds despite the fact
     that it has vacancy problems, and despite the fact that some occupied units are in need of repair.
     In addition, our physical inspections at some developments showed that HUD funds were
     expended ineffectively.

                                       The PHA was awarded CGP funding for the years 1992-1994
                                       amounting to $15,191.931. Through March 1995, only
                                       $3,720,354 of CGP funds were expended while $11,471,577,
                                       or approximately 75.5% remained unexpended.

                                       During our site visits, we examined the interior and exterior
                                       conditions at each development. We found that some HUD
                                       funds were expended on poor quality upgrades. For example,
                                       we found that roofs and siding at several of the developments,
                                       which were installed within the last 10 years, are in need of
                                       extensive repair or replacement. Problems with the roofs have
                                       also caused interior water damage in some of the units. Other
                                       work recently completed at one development included exterior
                                       electrical wiring that was not properly covered or secured and
                                       created a safety hazard, especially for children.

                                       Notwithstanding the PHA's difficulties in administering HUD
                                       funding in the past, efforts are being made to improve
                                       deficient conditions existing at the developments utilizing the
                                       unexpended modernization funding. However, unless HUD
                                       closely monitors the PHA's efforts, problems such as poor
                                       workmanship and undue delays in improving the living
                                       conditions at the developments will recur.

                                       Vacancy Reduction Program


                                       The PHA was awarded $1,740,000 for its Vacancy Reduction
                                       Program (VRP) with activities scheduled to start in January
  Vacancy Reduction
                                       1995. By early July 1995, the PHA had expended or obligated
  Program status
                                       $848,000 (69%) of the amount budgeted for dwelling
                                       structures at three of its family type developments. Yet,
                                       vacancy levels decreased only slightly. Vacancies at the three
                                       developments were 231 in December 1994. However, by June
                                       1995 the number of vacancies declined by only seven to 224,
                                       even though 63 units had been renovated and were ready for
                                       occupancy. The statistics indicate that improvement is needed
                                       in the administration of the program.




96-NY-204-1004                                   Page 6
                                                                                   Finding 1



                           The PHA continues to experience difficulties with vacancies
                           at all six family type developments since vacancies have
                           remained substantially unchanged since 1988. For example,
                           the number of vacancies in March 1988 were 305 while 317
                           units were vacant in June 1995. During this time over $60
                           million in HUD funds had been expended by the PHA to
                           improve the living conditions at its housing developments.

                           Drug Elimination Program

                           HUD has provided funding for the PHA's Drug Elimination
Drug Elimination Program
                           Program (DEP) for the past six years. Grants for the later two
status
                           years have not yet been implemented. For years 1990 through
                           1993 DEP grants totaled $1,650,000, all of which were
                           obligated or expended through June 1995.

                           Statistics provided by the Camden Police Department indicate
                           that drug-related crime rates have not decreased over the past
                           several years in the City. In fact, in 1990 there were 979 drug
                           arrests in the City and the number increased to 1,432 by 1994.

                           PHA officials advised that it is difficult to accurately assess the
                           impact of the Drug Elimination Program on crime activity in
                           public housing because the limited funding has to be applied
                           not only to drug prevention, but to intervention and security
                           programs as well. Moreover, the police department advised
                           the PHA that a shortage of manpower exists and the crime
                           rate has drained the police resources to combat criminal
                           activity and drug use at the housing developments. PHA
                           officials contend that the scarce resources of the police
                           department have further impacted their ability to effectively
                           respond to drug and crime problems in public housing.

                           HOPE VI URD Program

                           The PHA received a $42.1 million grant under the HOPE VI
HOPE VI URD Program        URD Program. The grant is intended to transform the
status                     McGuire Gardens housing development into a landscaped
                           community and will create opportunity by generating 100 new
                           jobs for residents and by providing opportunities for resident-
                           operated businesses, together with job training and technical
                           assistance in business enterprise development for public
                           housing residents.



                                     Page 7                                     96-NY-204-1004
Finding 1


                 Even though the URD staff has been operational since January
                 1995, only $175,000 had been expended under the program at
                 May 31, 1995 and was almost entirely for salaries, fringe
                 benefits, and office supplies and equipment. In addition, it was
                 necessary for the PHA to request extensions of the due dates
                 for the submission of various documents as required by Article
                 XXI, Special Conditions of the Grant Agreement. The
                 extensions requested ranged in time from two months to five
                 months.

                 However, on November 21, 1995 the Acting Assistant
                 Secretary for Public and Indian Housing advised the PHA
                 that: "Article XXI.3. of the HOPE VI Grant Agreement
                 required the PHA to create and empower Success Against All
                 Odds Inc. (SAAO) to administer the HOPE VI Program. The
                 PHA has failed to legally create SAAO. Furthermore, the
                 documents the PHA submitted to HUD on September 25,
                 1995 fail to seriously address key issues related to the role of
                 SAAO in this project, as required by Article XXI, paragraph
                 3 including its relationship to the Construction Manager and
                 the PHA."

                 The PHA was advised that these failures not only constitute a
                 Grant Agreement default but call into serious question the
                 PHA's capability to effectively accomplish a successful
                 revitalization of the McGuire Gardens community. The PHA
                 was required by HUD to prepare and submit a default
                 resolution plan. The plan must demonstrate convincingly that
                 the PHA has recognized and resolved every factor which has
                 caused it to fail to expeditiously revitalize the public housing
                 units covered by the Grant agreement. Should the PHA fail to
                 comply, HUD would recapture the funds and award them to
                 another PHA.

                 We believe that HUD's warning regarding the inept
                 administration of the URD Program symbolizes the overall
                 poor administration by the PHA of all of HUD's programs. As
                 a result, residents of public housing fail to realize the full
                 benefit of the scarce resources provided by HUD. The
                 seriousness of the problem is illustrated by the other 12
                 findings included in this report. Accordingly, we believe that
                 HUD should consider one of the three options contained in the
                 recommendation as the future form of management for the
                 PHA.



96-NY-204-1004            Page 8
                                                                         Finding 1




PHA Comments        The PHA disagrees with the finding and recommendation.
                    Specifically, it is the PHA's position that the finding contains
                    no substantial supportive documentation to conclude that the
                    overall living conditions for residents have not improved or
                    that they are unsuitable.




OIG Evaluation of   We disagree with the PHA's comments since: (1) most of the
PHA Comments        inspected units did not meet minimum HQS; (2) unsightly
                    conditions of the grounds buildings and common areas
                    existed, and (3) the poor administration and lack of progress
                    on its housing programs do substantially support and
                    document that tenant living conditions have not improved
                    despite the availability of HUD funding.


Recommendation      The adverse conditions at the PHA require HUD to consider
                    some alternative to the current PHA management.

                    1A.    Therefore, we recommend that you consider one of
                           the following:

                           (1) Joint management consisting of the existing PHA
                               administration and HUD,
                           (2) Appointment of a third party to manage the PHA,
                               or
                           (3) Take over of the PHA by HUD.




                             Page 9                                    96-NY-204-1004
Finding 1




                 (THIS PAGE LEFT BLANK INTENTIONALLY)




96-NY-204-1004                   Page 10
                                                                                           Finding 2




     Improvements Are Needed in the System of
           Procurement and Contracting

Our review of the PHA's system for procurement and contracting showed various instances of
deficiencies and/or noncompliance with HUD regulations and requirements, and with its own
procurement policy. Some of the deficiencies or instances of noncompliance include: (1) Request For
Proposal (RFP) was received after the expiration date; (2) procurements were made where no quotes
were requested; and (3) instances where costs were not adequately supported. The deficiencies and
noncompliances are attributed to internal influences and oversight by staff in the review process. As
a result, assurance that the related procurement and contract costs were proper and reasonable has
been diminished and the PHA has incurred costs of $733,391.57 that are unsupported.



                                      A total of 10 contracts and/or procurements were selected for
                                      review. Five were selected based on deficiencies identified
                                      during a probe1 of the PHA conducted under Operation Safe
                                      Home in April 1994. Three were selected based on
                                      information that came to our attention during the audit and the
                                      remaining two were selected at random.

                                      The particulars involving the contracting and procurement
                                      deficiencies and noncompliances are discussed in greater detail
                                      in the subsections below.

                                      Noncompliance and Deficiencies in Contracting

                                      1.      Contract for Preparation of Application to HUD for an
                                              Urban Revitalization Demonstration (URD) Grant -
                                              (Unsupported $165,000)

                                              The contract files showed that the Request for
 URD Grant
                                              Proposal (RFP) that was accepted and upon which the
                                              contract was awarded was dated three days after the
                                              expiration date for acceptance. The RFP was received
                                              and date stamped four days after expiration.
                                              Nonetheless, the contract was awarded the firm
                                              submitting the late RFP. The contract price was


       1
           An intensified OIG review to detect fraud


                                               Page 13                                  96-NY-204-1004
Finding 2



                 $165,000 and exceeds the next lowest RFP by
                 $100,000. Since the RFP was late, it should have been
                 rejected and the amount of $165,000 is considered to
                 be unsupported.

                 Federal procurement regulations, 24 Code of Federal
                 Regulation (CFR) Section 85.36, requires solicitation
                 of proposals from an adequate number of qualified
                 sources. In addition, a method for conducting
                 evaluations of the proposals received and for selecting
                 awardees is required. The PHA has adopted
                 procedures to publicize RFPs which include a deadline
                 date for submission of proposals.

                 Inconsistencies were also noted with the dates of the
                 PHA Board approval and award of the contract dated
                 March 5, 1993.

                 The Board meeting minutes on March 24, 1993 [1]
                 provide:

                 "Chairwoman: presented to the Board for approval
                 Resolution "F" Awarding the Board of Commissioners
                 Action Taken on Friday, March 26, 1993, [1]
                 Awarding Contract to (name of Contractor) to
                 Prepare the Housing Authority of the City of
                 Camden's Urban Revitalization Demonstration
                 application in the amount not to exceed $165,000.00.
                         RESOLUTION NO. 6837
                 RESOLUTION AWARDING THE BOARD OF
                 COMMISSIONERS ACTION TAKEN ON FRIDAY,
                 MARCH 5, 1993 [1] [2] AWARDING CONTRACT
                 TO (name of contractor) TO PREPARE THE
                 HOUSING AUTHORITY OF THE CITY OF
                 CAMDEN            URBAN         REVITALIZATION
                 DEMONSTRATION APPLICATION IN THE
                 AMOUNT NOT TO EXCEED $165,000"

                 [1] There was no plausible explanation for the
                     inconsistency in the dates.

                 [2] There were no Board Minutes for March 5,
                     1993.



96-NY-204-1004    Page 14
                                                                    Finding 2



                  2.   Legal Contracts for Management Operations -
                       (Unsupported $471,919.14)

                       The PHA entered into several contracts with a legal
Legal Contracts
                       firm to provide management legal services for the
                       PHA's operations. We reviewed payments made to the
                       legal firm from January 1, 1992 through the end of our
                       audit period of March 31, 1995 under two contracts.
                       It should be noted that there was no contract in affect
                       from January 1, 1993 through March 31, 1993 even
                       though costs were charged during this period.

                       During the period reviewed the firm was paid
                       $516,840.14 for legal services. We found that
                       $471,919.14 of the costs were not adequately
                       supported since the billings submitted were vague and
                       unclear as to the actual services provided. For
                       example, descriptions on many of the billings merely
                       included language, such as: "review letter"; "prepare
                       brief"; "telephone conversation"; "prepare for court";
                       "facts investigation"; "conference"; and, "court
                       appearance". While the billings identified the case,
                       only vague descriptions were shown for the services
                       provided.

                       The contracts also provided for monthly retainer
                       payments for the general scope of services to be
                       provided. Both contracts contained a list of more than
                       10 areas of general services to be provided. In many
                       instances, the only documentation provided was a
                       copy of that portion of the contract which showed the
                       annual amount due and the provision for monthly
                       payments. In other instances, no documentation was
                       available to support the monthly payments.

                       Other charges were made for out-of-pocket costs.
                       However, we found that the costs were generally
                       either not supported or represented payments to
                       another legal firm for services that may have been
                       included as part of the monthly retainer amount.

                       The deficient costs may not meet the reason-ableness,
                       necessity, or economy requirement of Section 406 of
                       Part II of the ACC. Thus, the charges totaling


                        Page 15                                  96-NY-204-1004
Finding 2



                      $471,919.14 are considered to be unsupported
                      pending a HUD eligibility determination.

                      Other deficiencies include:

                      (1) The files for the later of the two contracts
                          contained two proposals. However, an evaluation
                          or ranking and rating of the proposals was not
                          available even though the firm selected had a base
                          bid of $1,000 more than the other proposal.

                      (2) One payment made in May 1994 included costs for
                          services dated back to July 1992, indicating a
                          breakdown in controls over Accounts Payable.

                      (3) Other payments were made to establish, and later
                          increase to $1,500, a trust account, (in the name of
                          the legal firm) to make funds available to cover
                          court costs on certain tenancy matters. Although
                          the disbursements represented a prepaid expense,
                          they were charged to legal expense, thereby losing
                          control and identity.

                 3.   Legal Contract on the URD Program - (Unsupported
                      $23,333.31)

                      A contract was executed on May 19, 1995, to provide
 URD Legal
                      legal services for the URD Program. The contract
                      provides for an annual amount of $40,000 payable
                      monthly as full compensation. The contract scope of
                      services includes eleven areas of services to be
                      provided. At December 31, 1995, the PHA had paid
                      $23,333.31 under the contract.

                      Our review showed that the billings submitted for
                      payment merely identified the charges as a monthly
                      retainer. There was no explanation of the services
                      provided. Accordingly, we consider the costs incurred
                      of $23,333.31 to be unsupported.

                      Office of Management and Budget (OMB) Circular A-
                      87, provides that, to be allowable under a grant
                      program, costs must be necessary and reasonable for
                      proper and efficient administration of the program.


96-NY-204-1004         Page 16
                                                                              Finding 2



                           Making equal monthly payments, without
                           consideration given to the level and extent of the
                           services provided, precludes the PHA from assuring
                           that the costs incurred are necessary and reasonable
                           and that the services contracted for have been
                           provided.

                           In addition, the files showed that the three proposals
                           received would be evaluated as part of the process for
                           awarding the contract. However, there were no
                           documented evaluations available for review.


                      4.   Contract for Relocation of Residents to Facilitate
Relocation Contract
                           Modernization Work at Various Projects -
                           (Unsupported $8,280)

                           The PHA originally requested bids on the contract in
                           May, 1993; but received no responses. Bids were
                           again requested in August 1993 and two companies
                           submitted proposals. However, one of the companies,
                           not the one who submitted the lowest proposal, was
                           not a moving company and did not respond to many of
                           the items in the proposal package, such as:

                           •      Evidence of ability to perform the work.
                           •      Demonstration of complete understanding of the
                                  proposed project.
                           •      Evidence of license to perform the work.
                           •      Profiles of the firms principals, staff and facilities.
                           •      Certified statement that the company is not
                                  debarred, suspended, or otherwise prohibited from
                                  professional practice by Federal, State or local
                                  agencies.
                           •      Affirmative action plan and/or indication of
                                  minority participation.
                           •      Proposed plan of interaction with or outreach to
                                  the residents of the development.
                           •      References.

                           Federal procurement regulations, 24 CFR Part 85.36
                           provide that proposals will be solicited from an
                           adequate number of qualified sources. Also, the PHA
                           procurement policy provides that if only one


                               Page 17                                     96-NY-204-1004
Finding 2



                      responsive bid is received, the award shall not be made
                      unless a cost or price analysis verifies the
                      reasonableness of the price.

                      Based on the above deficiencies, the two proposals
                      should have been rejected and the contract re-bid since
                      a cost or price analysis was not performed.
                      Nonetheless, the Modernization Department
                      recommended that the contract be awarded the low
                      bidder. Therefore, the payments made on the contract
                      in the amount of $8,280 are considered to be
                      unsupported.

                      Other deficiencies associated with the bid proposal or
                      contract are: when preparing the bid proposal
                      package, the PHA failed to request bids for moves
                      comprising the different types of buildings involved
                      such as Row-Type, High-Rise, or Walk-Up. The
                      contractor, who was awarded the contract, did not
                      stipulate whether the fees, identified by bedroom size,
                      applied to all types of buildings. However, the
                      Modernization Department assumed that the fees
                      applied to any type of move and reported the
                      assumption to the Executive Director when
                      recommending the award of the contract. The
                      proposal selected for award was not prepared on the
                      contractor's letterhead and was not dated. Neither of
                      the two proposals received by the PHA had been time
                      or date stamped. Finally, the contract was submitted to
                      HUD for approval after it had been executed rather
                      than before and the contract did not include a
                      maximum contract price.

                      24 CFR Part 85.36 of the Federal regulations requires
                      that all solicitations incorporate clear and accurate
                      descriptions of the service to be procured and that
                      adequate procurement records will be maintained. In
                      addition, the HUD Newark Office established
                      threshold levels that, if exceeded, require review and
                      approval of contract documents before execution by
                      the PHA.

                 5.   Contract for Fence Installation at Kennedy, Mickle,
                      and Westfield Towers


96-NY-204-1004         Page 18
                                                                        Finding 2



                          A review of the contract files showed the bid package
Fence installation
                          included a requirement that: "It shall be necessary for
                          the bidder to present a financial statement indicating
                          the condition of his company of not more than three
                          months prior to the bid submission."

                          However, the contract files contained a note from the
                          bidder that it was agreed to between the PHA
                          employee accepting the bid packages and the bidder
                          that if the bidder was awarded the contract, a financial
                          statement would be mailed immediately. Although the
                          bidder was awarded the contract, a financial statement
                          was still not available in the contract files at the time
                          of our review. On January 23, 1996, the PHA
                          provided us a financial statement. The statement is
                          dated August 10, 1995. Thus, it was not available to
                          the PHA by the bid date of June 7, 1995.

                          Despite the requirement and the bidder's failure to
                          meet the requirement, the contract was awarded for
                          $149,300. No payments were made on the contract at
                          the time of our review in January, 1996.

                     6.   Contract for Land Development Planning Review
                          Services on URD Program - (Unsupported $9,368)

                          There were no RFP's prepared and no quotes were
Land Development
                          requested or recorded for the contract. Thus, the PHA
                          was denied the benefit of competitive proposals to
                          ensure that the best possible price and quality services
                          were obtained. Accordingly, the payments made on
                          the contract amounting to $9,368 are considered to be
                          unsupported.

                          The contract provided for maximum compensation of
                          $35,000 per year and included an hourly rate of
                          $26.92 for services rendered. However, there was no
                          documentation to show how either the maximum
                          compensation or hourly rate were determined.

                          OMB Circular A-87, Cost Principals for State and
                          Local Governments, provides that, to be allowable
                          under a grant program, costs must be necessary and



                           Page 19                                    96-NY-204-1004
Finding 2



                               reasonable for proper and efficient administration of
                               the program.


                               The Contractor's duties are vague and unclear.
                               According to the contract, the Contractor's duties are:
                               "Under direction, the Contractor shall perform the
                               duties of Principal Planner Land Development Review,
                               as outlined by the New Jersey Department of
                               Personnel. The Contractor may also perform duties of
                               a similar nature as needed."

                               The contract was not brought before the PHA Board
                               of Commissioners for approval.

                               24 CFR Part 85.36 of the Federal regulations requires
                               all procurement transactions be conducted in a manner
                               providing for full and open competition.

                          7.   Contract for Environmental Planning Services on
                               URD Program - (Unsupported $9,230)

                               There were no RFP's or quotes prepared for the
 Environmental Planning
                               contract. Thus, the PHA was denied the benefit of
                               competitive proposals to ensure that the best possible
                               price and quality services were obtained. Accordingly,
                               the payments made on the contract amounting to
                               $9,230 are considered to be unsupported.

                               24 CFR Part 85.36 of the Federal regulations requires
                               all procurement transactions be conducted in a manner
                               providing full and open competition.

                               The contract provided for an hourly rate of $65 for
                               services rendered. However, there was no
                               documentation to show how the hourly rate was
                               determined.

                               OMB Circular A-87, Cost Principals for State and
                               Local Governments, provides that, to be allowable
                               under a grant program, costs must be necessary and
                               reasonable for proper and efficient administration of
                               the program.



96-NY-204-1004                  Page 20
                                                                        Finding 2



                           The contractor's duties are vague and unclear.
                           According to the contract, The Contractor's duties are:
                           "Under direction, the Contractor shall perform the
                           duties of Principal Planner Environmental, as outlined
                           by the New Jersey Department of Personnel. The
                           Contractor may also perform duties of a similar nature
                           as needed."

                           The contract was not brought before the PHA Board
                           of Commissioners for approval.

                           Apart from the above, the contract file contained a
                           purchase requisition and purchase order that were
                           processed for the Contractor for $195. The purchase
                           requisition described the payment as "To pay
                           Consultant for RFP for McGuire Gardens." Thus, it
                           appears the payment was for the Contractor to prepare
                           a resume and the amount is also unsupported.

                    Noncompliance and Deficiencies in Procurements

                    8.     Purchase Order to Provide Computer Training -
                           (Unsupported $4,500)

                           The PHA executed a Purchase Order on August 11,
Computer training
                           1993 with an employee of the City Clerk's Office to
                           provide Word Perfect Computer Training to 15
                           employees.

                           Our review of the Purchase Order showed:

                           The Purchase Order was executed contrary to the
                           provisions of the PHA's procurement policy. The
                           policy provides that for purchases in excess of $1,000,
                           but under the State public bid threshold, no less than
                           three offerors shall be solicited to submit price
                           quotations, which may be obtained orally, by
                           telephone, or in writing. The names, addresses, and/or
                           telephone numbers of the offerors and persons
                           contacted, and the date and amount of each quotation
                           shall be recorded and maintained as a public record.

                           Discussions with PHA officials disclosed that the only
                           proposal (offer) provided was from the City employee,


                            Page 21                                  96-NY-204-1004
Finding 2



                         who worked with the former PHA Chairwoman, in the
                         City Clerk's office. The former Chairwoman had
                         decided that the training was necessary and which
                         employees should attend.

                         The entire amount of the proposal, or $4,500, was
                         paid before all 15 employees received the training. In
                         fact, four employees have either not received or have
                         not completed the training. Thus, the PHA should
                         request reimbursement of the cost for any training not
                         provided. In addition, the cost to provide the training
                         may not be reasonable since the cost was almost four
                         times as great as similar training provided at the local
                         community college. Thus, the $4,500 is considered to
                         be unsupported.

                         Finally, the City employee did not specify any
                         experience or expertise as an instructor.

                  9&10. Additional Legal Services - Operations - (Unsupported
                        $41,761.12)

                         The PHA incurred costs for legal services in addition
 Legal Services
                         to those provided under the legal contract for
                         management operations. The costs were incurred
                         without an RFP having been prepared and without a
                         contract having been executed. Thus, the PHA was
                         denied the benefit of competitive proposals and full
                         and open competition to ensure that the best possible
                         price and quality services were obtained as required by
                         24 CFR Part 85.36 of the Federal regulations.
                         Accordingly, the costs incurred during the audit period
                         amounting to $37,346.70 are considered to be
                         unsupported.

                         In addition, we found that some of the services
                         provided may have been within the scope of services
                         of the PHA's legal contract for management
                         operations. Specifically, charges for personnel and
                         union related matters.

                         Apart from the above, still other costs were incurred
                         with another firm in addition to those provided under
                         the legal contract for management operations. We


96-NY-204-1004            Page 22
                                                                      Finding 2



                         found that quotations were not solicited; an RFP was
                         not prepared and an agreement had not been executed.
                         Moreover, the billings submitted for payment showed
                         that some of the services provided may have been
                         within the scope of services of the PHA's legal
                         contract for management operations such as charges
                         for attending Board meetings and reviewing Board
                         meeting agendas.

                         Still other charges were made for services relating to
                         liability insurance claims. PHA officials advised that
                         such duties are routinely performed by in-house staff.
                         Therefore, the costs incurred during the audit period
                         amounting to $4,414.42 are considered to be
                         unsupported.

                  The procurement and contracting deficiencies cited in this
                  Finding indicate a general weakness in the PHA's system of
                  awarding and administering contracts. Unless the PHA
                  recognizes its responsibility to implement controls that will
                  ensure compliance with the procurement and contracting
                  requirements, these or similar deficiencies will continue.




Recommendations   We recommend that you require the PHA to:

                  2A.    Provide justification for the unsupported costs so that
                         an eligibility determination can be made.

                  2B.    Reimburse from non-Federal funds, the amount of any
                         unsupported costs determined to be ineligible.

                  2C.    Adopt necessary controls to ensure compliance with
                         procurement requirements when RFPs are solicited.

                  2D.    Establish controls to ensure that price or rate quotes
                         are obtained from an adequate number of qualified
                         sources when procurement by small purchase
                         procedures are followed.

                  2E.    Adopt controls to ensure that the proper method of
                         procurement is achieved and, that where mandated,



                          Page 23                                  96-NY-204-1004
Finding 2



                       procurements will provide for full and open
                       competition.

                 2F.   Establish procedures to ensure that duplication of
                       services or effort does not occur when work of a
                       similar nature is procured.




96-NY-204-1004          Page 24
                                                                                             Finding 3




Improvements Are Needed in the Monitoring of
 Subgrantees for the Drug Elimination Program


The PHA was awarded Drug Elimination Program (DEP) grants of $250,000 in 1990 and $466,600
each for years 1991, 1992 and 1993. The City of Camden, Department Of Community Services, acted
as Subgrantee for the PHA and incurred costs under the program. Our review of the costs showed
various deficiencies that indicate a lack of monitoring by the PHA. The deficiencies occurred because
procedures were not established to ensure adequate monitoring of Subgrantees. Consequently, not
only has assurance that program objectives were met been diminished; but the PHA has lessened its
assurance that program funds were properly safeguarded against waste and loss. As a result, ineligible
and unsupported costs of $ 5,472.14 and $ 607,834.60, respectively, were charged to the program.




                                       Originally we intended to review a sample of selected
 Review was expanded
                                       transactions as to their propriety and eligibility for the 1993
                                       DEP grant. However, due to the wide range of deficiencies
                                       noted from the review of transactions for the 1993 grant, it
                                       became necessary to review the DEP grants from 1990
                                       through 1993 in detail.

                                       Examples of some of the types of ineligible and unsupported
                                       costs included in the claims submitted by the Department of
                                       Community Services:

                                       Includes three instances where claims were made for costs that
 Ineligible Costs
                                       had already been reimbursed and thus represent a duplication;
                                       the documentation for another claim showed the cost
                                       pertained to the City's Community Development Block Grant
                                       (CDBG) program; and tenant patrol compensation costs were
                                       claimed even though they represented an ineligible use of
                                       funds.

                                       Includes several claims for payroll costs that were not
 Unsupported Costs
                                       adequately supported by payroll journals or time records;
                                       various claims contained inadequate documentation such as
                                       either no purchase order, purchase requisition, vendor invoice
                                       or, where they existed, sufficient detail was lacking to allow an



                                                Page 25                                    96-NY-204-1004
Finding 3



                 eligibility determination to be made; and finally the
                 documentation for some claims was unclear as to whether the
                 charges were related to an activity designated to meet
                 program objectives. Generally, the files failed to contain
                 evidence of Subgrantee payment, such as copies of cancelled
                 checks or cancelled invoices for charges to the program.

                 The above ineligible and unsupported costs are further
                 identified and explained in Appendix C of this report.

                 Apart from the above, the City Police Department also acted
                 as a Subgrantee on each of the DEP grants. Accordingly, we
                 reviewed costs for a two week period from April 26, 1993
                 through May 9, 1993 and found:

                 •   Charges were based on a flat $25 per hour for police work
                     plus a five percent charge for administrative costs. Yet,
                     the PHA files did not document or explain the basis for the
                     charges.

                 •   For the two week period the PHA was charged
                     $35,512.50 based on the $25 rate and excluding the
                     charge for administrative costs. However, Police
                     Department payroll records showed payroll costs of only
                     $32,582.93 or $2,929.57 less than the amount charged the
                     DEP.

                 Even though we did not question either the rate or the cost
                 difference, the PHA should address these deficiencies when
                 establishing procedures to provide for effective monitoring of
                 Subgrantee performance.

                 OMB Circular A-87 provides that, to be allowable under a
                 grant program, costs must be necessary and reasonable for
                 proper and efficient administration of the program. The
                 Circular further provides that, to be allowable under a grant
                 program, costs can not be allocable to or included as a cost of
                 any other federally financed program. In addition, 24 CFR
                 Part 85.40 of the Federal regulations provides that, Grantees
                 are responsible for managing the day-to-day operations of
                 grant and subgrant supported activities. Grantees must
                 monitor grant and subgrant supported activities to assure
                 compliance with applicable Federal requirements.



96-NY-204-1004            Page 26
                                                                       Finding 3



                  The above deficiencies are even more significant since PHA
                  officials confirmed that site visits were not made to
                  Subgrantees to verify claims and disbursement records. The
                  lack of monitoring is further evidenced from the ineligible and
                  unsupported costs described above. Unless the PHA
                  establishes procedures to provide effective monitoring of
                  Subgrantee performance, deficiencies similar to those cited
                  herein will continue in the administration of the more recent
                  DEP grants of $582,250 awarded on November 24, 1994 and
                  $582,250 awarded on August 16, 1995.




Recommendations   We recommend that you require the PHA to:

                  3A.    Establish procedures that will provide for effective
                         monitoring of Subgrantee performance.

                  3B.    Reimburse the ineligible costs of $5,472.14 from non-
                         Federal funds.

                  3C.    Provide additional documentation for the unsupported
                         costs of $607,834.60 so that an eligibility
                         determination can be made.

                  3D.    Reimburse from non-Federal funds the amount of any
                         unsupported costs that are determined to be ineligible.




                           Page 27                                  96-NY-204-1004
Finding 3




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96-NY-204-1004                   Page 28
                                                                                            Finding 4




   PHA Exceeded HUD Approved Staffing and
   Provided Unsupported Administrative Salary
                  Increases

Despite HUD having informed the PHA not to exceed the staffing levels identified in the approved
budget, between October 1992 and December 1995, the PHA added at least six positions that were
not previously included in the approved budgets. PHA officials stated that the excess staffing
occurred because the former Chairwoman recruited the individuals and directed they be hired. Also
during the period, the former Chairwoman recruited and directed the hiring of another 13 individuals
who were placed in positions that had already been approved by HUD. By directing the PHA to hire
the individuals, which included known poor performers, we believe the former Chairwoman created
an appearance of favoritism. In addition, during 1994 and 1995, the PHA also violated HUD
requirements by providing salary increases that were not included in the budget and/or not justified.
The Executive Director advised that the increases were made at the direction of either the former
Chairwoman or himself. As a result, we consider the salary costs totalling $219,373 to be
unsupported pending a HUD eligibility determination.




                                      a.      Former Chairwoman Directed PHA to Hire Personnel
                                              (Unsupported Costs $187,497)

                                      HUD notified the PHA each year that any staffing not
 HUD and PHA
                                      included in the approved budget would be unauthorized.
 requirements
                                      Further, HUD OIG Program Integrity Bulletin for Public
                                      Housing Agency Commissioners dated November 1990 states
                                      that Commissioners should set policy and the Executive
                                      Director should run the day to day operations. Also, the
                                      Bulletin along with the PHA's personnel manual state that the
                                      Executive Director is responsible for recruiting and hiring
                                      PHA staff.

                                      Contrary to the above requirements, we found that between
 PHA did not budget six
                                      the period October 1992 and December 1995, the PHA hired
 positions
                                      at least six individuals for positions not previously included in
                                      the approved budgets. PHA officials told us that the former
                                      Chairwoman recruited the individuals and directed they be




                                               Page 29                                    96-NY-204-1004
Finding 4



                                           hired. Once hired the positions appeared in the subsequent
                                           year budgets.

                                           The decision to hire individuals for positions not included in
                                           the approved budget has resulted in additional salary costs of
                                           $187,497 and we consider such costs as unsupported pending
                                           a HUD eligibility determination.

                                           The particulars of the six positions are as follows:


              Position                             Month Hired           Salary
              Chief Accountant 2/                  4/95                  $ 42,000
              Assistant Chief,
              Maintenance 1/                       4/93                    35,000
              Housing Coordinator                  7/93                    35,000
              Assistant Budget
              Examiner                             8/93                    25,917
              Program Monitor 2/                   2/95                    25,000
              Field Representative,
              Rehabilitation                       5/93                    24,580

                   TOTAL                                                 $187,497

1/   Second position having this title.

2/   Even though the positions were filled during 1995; the entire salary is unsupported pending a HUD eligibilit y
     determination.

                                           Also, during the period between October 1992 and December
                                           1995, PHA officials told us that, in addition to the six
                                           individuals mentioned above, another 13 individuals were
                                           hired as a result of the former Chairwoman's influence and
                                           were placed in budgeted positions that had already been
                                           approved by HUD. Two of the above individuals were then
                                           dismissed due to poor performance. Both were later rehired
                                           at the insistence of the former Chairwoman. Their poor
                                           performance continued and they were again dismissed.




96-NY-204-1004                                        Page 30
                                                                             Finding 4




                        b.     Salary Increases to Administrative Staff (Unsupported
                               $31,876)

                        HUD would notify the PHA each year that salary increases not
HUD and PHA
                        included in the approved budget were unauthorized. In
requirements
                        addition, in 1993, the Board of Commissioners approved the
                        PHA's policy to align administrative salaries with comparable
                        positions in the City/County of Camden. This policy
                        supplements the PHA's 1992 Personnel Manual by specifically
                        addressing how administrative salaries are to be determined.
                        Under the policy, which adopts the provisions of HUD
                        Handbook 7401.7, the Personnel Policies Handbook the PHA
                        would only change administrative salaries as needed to
                        maintain comparability with the City/County of Camden. The
                        policy also required the PHA to maintain comparability data
                        in its files to support any salary changes.

                        Our review disclosed that in calendar years 1994 and 1995,
Salary increases made
                        the PHA provided salary increases to a total of nine
without comparability
                        administrative staff employees. These increases were in
and/or not budgeted
                        addition to the employees' annual cost of living increases. The
                        Executive Director advised that no comparability data was
                        developed or maintained to justify or support the increases.
                        In addition, the 1995 increases were not included in the
                        operating budget. Thus, the PHA made the 1995 increases
                        not only without HUD concurrence, but has no assurance that
                        either the 1994 or 1995 increases meet the necessary and
                        reasonable cost requirement of Section 406, Part II of the
                        ACC. As a result, the increases totaling $31,876 are
                        considered to be unsupported pending a HUD eligibility
                        determination.

                        The particulars of the increases are as follows:




                                 Page 31                                   96-NY-204-1004
Finding 4




     Position                          Previous                                  Amount of             Percent of
     JANUARY 1994                      Salary               New Salary           Increase              Increase

     Chief of Maint.                   $42,000              $46,500              $4,500                10.7 1/

     Asst. Chief Maint.                 36,500               40,810              4,310                 11.8 2/

     Asst. Chief Maint.                 36,500               40,810              4,310                 11.8 2/

     Housing Coordinator                35,000               39,800              4,800                 13.7 2/

     JUNE 1995

     Dir. Staff Ops.                   $57,330              $60,000              $ 2,670               4.7 3/

     Dir. Redevelopment                 57,330               60,000               2,670                4.7 3/

     Dir. Administration                57,330               60,000               2,670                4.7 3/

     Dir. Finance                       57,330               60,000               2,670                4.7 3/

     Modernization Spec.                54,054               57,330               3,276                6.1 4/

         TOTAL                                                                   $31,876



1/      Executive Director determined employee deserved additional compensation for performing the duties of two positions.

2/      The Executive Director said that the former Chairwoman directed that the duties and responsibilities of the employee
        be changed.

3/      The Executive Director said that the former Chairwoman directed Executive Director to recommend to the Board that
        the Director's salary be increased to $60,000.

4/      The Executive Director said that the Former Chairwoman directed Executive Director to increase the salary for this
        position to equal that previously paid to the various department Directors.

                                                  The staffing and salary increase deficiencies described above
                                                  indicate significant weaknesses in the area of personnel
                                                  matters. Accordingly, the salary costs totalling $219,373 are
                                                  considered to be unsupported pending a HUD Field office
                                                  eligibility determination.



Recommendations                                   We recommend that you require the PHA to:

                                                  4A.     Provide assurance that the Executive Director will be
                                                          responsible for recruiting and hiring staff.




96-NY-204-1004                                              Page 32
                                                   Finding 4



4B.   Perform a salary comparability study to align
      administrative salaries with comparable positions in
      the City/County of Camden.

4C.   Restrict salary changes to those authorized in the
      budgets.

4D.   Adopt procedures that will ensure that anticipated
      salary increases are included in the operating budgets.

4E.   Reimburse from non-Federal funds the amount of any
      unsupported costs determined to be ineligible.




       Page 33                                  96-NY-204-1004
Finding 4




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96-NY-204-1004                   Page 34
                                                                                           Finding 5




Contrary to Requirements Payments for Unused
     Vacation and for Overtime Occurred

Contrary to requirements, the PHA compensated employees for unused vacation leave and overtime.
Specifically, the PHA was required by law and union contract to cancel any vacation leave in excess
of what each employee was allowed to carry into 1995. Instead, the Executive Director authorized
the PHA to use $65,031 in 1994 operating funds to compensate employees for unused vacation leave.
The Executive Director told us that the PHA's past practice of unlimited leave accumulation had
resulted in significant employee leave balances. While the Executive Director was aware of the
requirements to cancel excess leave, he felt compelled to compensate employees to avoid litigation
based upon past practice. Further, the Executive Director authorized $6,200 in overtime
compensation to supervisory administrative employees. The Executive Director told us that while he
realized that administrative staff do not qualify to receive overtime compensation, he had authorized
overtime compensation to be paid as a bonus because staff had worked overtime in pursuit of certain
goals. We consider the overtime compensation to be improper based on (1) the Federal Fair Labor
Standards Act provision which relieves the PHA from any statutory requirement to compensate
executive, professional, and administrative employees for overtime, and (2) lack of any HUD or PHA
provision to authorize overtime. Accordingly, we consider the $71,231 in total vacation leave and
overtime compensation as unsupported.




                                      a. Unused Vacation Leave Compensation (Unsupported
                                         $65,031)

                                      Title 11A "Civil Service", New Jersey Statutes Annotated
 State and PHA
                                      Section 11A:6-3 provides that vacation not taken in a given
 requirements and
                                      year because of business demands shall accumulate and be
 regulations
                                      granted during the next succeeding year only. The statute,
                                      along with PHA union contracts with similar requirements,
                                      cover all employees except those at the director level. The
                                      PHA's personnel manual allows directors to carry up to 60
                                      days vacation leave into the next succeeding year.

                                      The PHA did not comply with the aforementioned State Law,
 PHA paid $65,031 in
                                      its own union contracts and personnel manual when it
 unsupported vacation time
                                      compensated employees for unused vacation. Instead of
 compensation
                                      canceling any vacation in excess of the maximum each
                                      employee was allowed to carry over to 1995, the PHA



                                               Page 35                                   96-NY-204-1004
Finding 5



                        compensated employees for the excess leave. In addition, the
                        PHA paid four directors a total of more than $16,000 for
                        vacation time when in fact the directors had leave balances
                        below the maximum allowed. In total, the PHA paid $65,031
                        in compensation to employees for unused vacation time.
                        Because directors had not accumulated excess unused
                        vacation leave, and because State Law and union contracts
                        require excess accumulated leave for all other employees to be
                        canceled, we consider this expense to be unsupported.

                        b. Administrative Employee         Overtime     Compensation
                           (Unsupported $6,200)

                        Section 213 of the Federal Fair Labor Standards Act provides
 Criteria
                        that any employee employed in a bonafide executive,
                        administrative, or professional capacity is exempt from the
                        requirement of being paid overtime or compensatory pay.
                        Further, Section 307 of the ACC requires the PHA to adopt
                        personnel policies which address employee compensation.
                        The PHA's personnel policy in effect, dated October 1, 1992,
                        does not provide for administrative staff overtime or bonus
                        compensation. Finally, HUD Handbook 7401.7, PHA
                        Personnel Policies Handbook, in effect when this policy was
                        adopted, states that HUD may disallow PHA costs where the
                        PHA has acted imprudently in light of the ACC's Section 201
                        requirement for an efficient and economical operation.

                        The PHA paid a total of $6,200 to supervisory administrative
 PHA paid $6,200 in
                        staff for compensatory time. This compensatory pay, while
 unsupported overtime
                        termed "compensatory time and tasks payment" and
 compensation
                        "compensatory award" in the PHA's resolution, was in fact
                        payment based on the amount of overtime each employee
                        worked according to the Executive Director. Supervisory
                        administrative staff received overtime compensation ranging
                        from $200 to $500, with a total of $6,200 charged to the 1994
                        operating budget. Staff who received compensation included
                        the Assistant Executive Director, all department Directors,
                        Chief of Maintenance, Modernization Specialist, and others.
                        Because of the criteria discussed earlier, we believe the Board
                        of Commissioners did not exercise proper oversight with the
                        adoption of this resolution to ensure for an efficient and
                        economical operation of the PHA. Accordingly, $6,200 is
                        considered unsupported costs.



96-NY-204-1004                   Page 36
                                                                     Finding 5



Recommendations   We recommend that you require the PHA to:

                  5A.   Institute controls that will ensure that payments for
                        unused vacation time and overtime are in compliance
                        with Federal, State and PHA requirements.

                  5B.   Provide justification for the $71,231 of unsupported
                        costs so that an eligibility determination can be made.

                  5C.   Reimburse the amount of any unsupported costs
                        determined to be ineligible from non-Federal funds.




                         Page 37                                  96-NY-204-1004
Finding 5




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96-NY-204-1004                   Page 38
                                                                                             Finding 6




       Questionable Payments for Parking Study

The PHA may have incurred costs that were not necessary by HUD requirements. The costs were
incurred for a parking study to be conducted at the various housing projects. Internal assertions may
have influenced the actual procurement of the study. We were told that the former Chairwoman
directed that the study be conducted. As a result, the cost of the study is considered to be
unsupported pending a HUD eligibility determination.

PHA officials advised they were instructed by the former Chairwoman just before a Board meeting
on November 12, 1992, to have the parking study performed by the Parking Authority of the City of
Camden even though they believed it was not the best use of funds and no previous discussions were
held as to the need for such study. In this regard, it was noted that, at the time the parking study was
arranged, the former Chairwoman was also the City of Camden City Clerk and the former Executive
Director of the Parking Authority was also the Chairman of the City of Camden Democratic Party.




                                       A review of the parking study file showed:
 Deficiencies found during
 file review
                                       •   A letter to the PHA from the Parking Authority dated
                                           November 12, 1992, states that the Camden City Parking
                                           Authority is pleased to respond to your request of October
                                           1992 to provide consulting services. However, the PHA
                                           was unable to provide us with any written request to the
                                           Parking Authority. Had a written request been made, we
                                           believe it most likely that the Parking Authority would
                                           have cited the date of the request in its letter to the PHA.
                                           The Parking Authority was also unable to provide us with
                                           any written request from the PHA in October 1992.

                                       •   It appears that the Request for Proposal (RFP) was
                                           prepared by the Parking Authority rather than the PHA.

                                       •   The RFP is dated November 12, 1992, the same date that
                                           the PHA Board Resolution was passed authorizing the
                                           Parking Authority to perform the study.

                                       •   The $50,000 cost for the study was paid out of Operating
                                           Funds and was not included in the approved budget.




                                                 Page 39                                   96-NY-204-1004
Finding 6



                  •     A formal contract was not executed.

                  •     Although the study was performed, the recommendations
                        of the study were never implemented.

                  •     There was no advertising of the PHAs intention to have
                        the study performed. Thus, there was no assurance that
                        the price was competitive.

                  Regarding competitive bidding, PHA officials advised that it
                  was their belief that competitive bidding was not required in
                  instances where one government entity (PHA) was contracting
                  with another (City of Camden Parking Authority). We advised
                  the PHA that 24 CFR Part 85.36 of the Federal regulations
                  does provide that: To foster greater economy and efficiency,
                  grantees and subgrantees are encouraged to enter into State
                  and local intergovernmental agreements for procurement or
                  use of common goods and services. However, due to the
                  deficiencies cited, we do not believe that the parking study has
                  fostered the economy and efficiency intended by the
                  regulations and may also not meet the necessary and
                  reasonable cost requirement of Section 406, Part II of the
                  ACC. Therefore, the cost of the study, or $50,000, is
                  unsupported pending a HUD eligibility determination.



Recommendations   We recommend that you require the PHA to:

                  6A.      Provide justification for the unsupported costs so that
                           an eligibility determination can be made.

                  6B.      Reimburse from non-Federal funds, the amount of any
                           unsupported costs determined to be ineligible.

                  6C.      Institute controls that will assure that costs meet the
                           economy and efficiency and the necessary and
                           reasonable requirements, prior to incurrence.




96-NY-204-1004              Page 40
                                                                                            Finding 7




        Improvements Are Needed in the
    Administration of the Youth Sports Program

The PHA, as Grantee, was awarded a Youth Sports Program grant of $125,000 on May 4, 1992. The
City of Camden, Department Of Community Services, was the Subgrantee who incurred program
costs. Our review of the costs charged to the program showed various deficiencies that indicate a lack
of proper monitoring by the PHA. The deficiencies occurred because controls were not established
to ensure adequate monitoring of the Subgrantee. Hence, assurance that program objectives were met
has been diminished and the PHA has lessened its assurance that program funds are properly
safeguarded against waste and loss. As a result, ineligible and unsupported costs of $15,555.55 and
$39,998.94, respectively, were charged to the program.




                                       The following items should not be considered to be all
                                       inclusive; rather, they represent only those deficiencies
                                       identified from our review of program costs.

                                       Ineligible Costs

                                       The Subgrantee made two payments totaling $14,170.55 to a
 $15,555.55 ineligible
                                       contractor for services that were charged to its CDBG
 Youth Sports Program
                                       program. However, the Subgrantee used the same supporting
 Costs
                                       documentation to claim reimbursement under the Youth
                                       Sports Program. Accordingly, the reimbursement represents
                                       a duplication and is ineligible.

                                       Another payment was made to a contractor by the Subgrantee
                                       for $1,135. Yet, the Subgrantee's books and records showed
                                       that the amount was already charged to the Drug Elimination
                                       Program (DEP) and is therefore ineligible for reimbursement
                                       under the Youth Sports Program.

                                       The Subgrantee's files showed that a vendor's invoice was
                                       overpaid by $250 and represents an ineligible charge to the
                                       program.




                                                Page 41                                  96-NY-204-1004
Finding 7




                          Unsupported Costs

                          The Subgrantee submitted claims for payroll costs amounting
 $39,998.94 unsupported
                          to $33,541.94 while only $589.32 was charged to the
 Youth Sports Program
                          program. Neither the Subgrantee nor the PHA files contained
 Costs
                          adequate documentation to support the costs claimed. For
                          example, $14,682.72 was claimed based solely on a
                          calculation providing for payment of two thirds of an 18
                          month budgeted amount. The balance of the costs, or
                          $18,859.22, was for overtime paid to Subgrantee staff.
                          However, the payroll records maintained by the Subgrantee
                          and the PHA did not identify the overtime as relating
                          specifically to the Youth Sports Program. Thus, the payroll
                          costs of $33,541.94 are considered to be unsupported.

                          The Subgrantee executed a contract with a non-profit
                          organization to provide program services. However, a
                          payment was made in the amount of $5,837 for services that
                          were not included in the contract scope of services. Not only
                          was the cost for the activity (Midnight Basketball) not
                          included in the contract scope of services, but it was
                          specifically deleted by amendment to the program contract
                          between the Subgrantee and the PHA. Accordingly, the
                          amount is considered to be unsupported pending a HUD
                          eligibility determination.

                          Four other Subgrantee claims totaling $620 did not contain
                          adequate documentation such as vendor files or canceled
                          checks to support the costs. Therefore, the $620 is considered
                          to be unsupported.

                          OMB Circular A-87 provides that, to be allowable under a
 Criteria
                          grant program, costs must be necessary and reasonable for
                          proper and efficient administration of the program. The
                          Circular further provides that, to be allowable under a grant
                          program, costs can not be allocable to or included as a cost of
                          any other federally financed program. In addition, 24 CFR
                          Part 85.40 of the Federal regulations provides that, Grantees
                          are responsible for managing the day-to-day operations of
                          grant and subgrant supported activities. Grantees must
                          monitor grant and subgrant supported activities to assure
                          compliance with applicable Federal requirements.



96-NY-204-1004                     Page 42
                                                                            Finding 7



                        Discussions with PHA officials confirmed that site visits were
 Discussions with PHA
                        not made to the Subgrantee to verify claims and disbursement
 Officials
                        records. The failure to monitor the Subgrantee is evident from
                        the ineligible and unsupported costs described above. Unless
                        the PHA establishes controls to provide effective monitoring
                        of Subgrantee performance, deficiencies similar to those cited
                        herein will continue in the administration of the most recent
                        Youth Sports Program grant of another $125,000 awarded on
                        August 16, 1995.



Recommendations         We recommend that you require the PHA to:

                        7A.    Establish controls that will provide for effective
                               monitoring of Subgrantee performance.

                        7B.    Reimburse the ineligible costs of $15,555.55 from
                               non-Federal funds.

                        7C.    Provide additional documentation for the unsupported
                               costs of $39,998.94 so that an eligibility determination
                               can be made.

                        7D.    Reimburse from non-Federal funds the amount of any
                               unsupported costs that are determined to be ineligible.




                                Page 43                                   96-NY-204-1004
Finding 7




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96-NY-204-1004                   Page 44
                                                                                        Finding 8




Lack of Control Over Gasoline Use and Charges


Because the PHA did not implement procedures to control the purchase of gasoline from the City of
Camden by its employees, unsupported gasoline costs of $14,506 were incurred and a cost efficiency
of $33,239.46 is claimed. The weaknesses in controlling the purchase of gasoline by employees is
partly attributed to the PHA's belief that the City's controls over its system were adequate.




                                     The PHA purchases gasoline for $1 a gallon and oil for $1 a
 OIG probe identifies
                                     quart for its vehicles from the City. During a PROBE
 excessive gasoline use
                                     conducted under Operation Safe Home in April 1994 it was
                                     noted that the PHA had little or no control over its gasoline
                                     usage and, in many instances, the amount of gasoline
                                     purchased appeared excessive. As a result, gasoline purchased
                                     throughout our entire audit period and through September 30,
                                     1995 was examined. During the period, several different
                                     systems were used by the City for the purchase of gasoline.
                                     However, the systems utilized did not provide any effective
                                     means for the PHA to monitor and control its gasoline
                                     purchases. We reviewed in detail the gasoline purchased
                                     during July 1994 and July and August 1995 and found:

                                     •   Vehicle receiving gas was not a PHA vehicle.
 Improprieties relating to
 the purchase of gasoline
                                     •   Gasoline purchased for former Chairwoman's personal
                                         vehicle.

                                     •   No authorization shown or improper authorization shown
                                         on the Daily Fuel Disbursement Record.

                                     •   Driver purchasing the gas was not a PHA employee.

                                     •   Quantity of gasoline purchased exceeded fuel tank size on
                                         vehicle.

                                     •   Driver's signature does not appear to be driver's
                                         handwriting and the driver's name is misspelled.




                                              Page 45                                 96-NY-204-1004
Finding 8



                  •   Employee on annual leave when gasoline was obtained.

                  •   Driver did not sign the Daily Fuel Disbursement Records
                      as required.

                  •   Gasoline was charged to the PHA even though the Daily
                      Fuel Disbursement Record showed the purchase was made
                      by the City-Department of Community Affairs.

                  •   Gas charged to the PHA but the purchase was not
                      recorded on the Daily Fuel Disbursement Record.

                  •   Some of the footings by the City on the Daily Fuel
                      Disbursement Record were incorrect which means the
                      amount charged the PHA was incorrect.

                  •   The Daily Fuel Disbursement Record was not signed by
                      the City as provided on the form.

                  Apart from the above improprieties relating to the purchase of
                  gasoline, we found that no contract or agreement exists
                  between the PHA and the City for the purchase of gasoline
                  and oil. The PHA began to recognize in late 1993 that
                  deficiencies existed in the City's system for obtaining and
                  charging gasoline. Accordingly, the PHA's Finance
                  Department refused to pay gasoline charges submitted by the
                  City since October 1993 to present because it was unable to
                  verify the propriety of the usage and charges. Therefore, the
                  costs paid during 1993 of $14,506 are considered to be
                  unsupported and the costs not paid from late 1993 to present
                  of $33,239.46 are shown as a cost efficiency.

                  Section 201, Part II of the ACC requires the PHA to operate
 Criteria
                  each project in such a manner as to promote serviceability,
                  efficiency, economy and stability. In addition, Section 406(B)
                  of the ACC requires that operating expenditures be necessary
                  for the operation of such project.

                  The details pertaining to the unsupported costs and the cost
                  efficiency are contained in the audit working papers.

Recommendations   We recommend that you require the PHA to:




96-NY-204-1004            Page 46
                                                   Finding 8



8A.   Implement procedures that will restrict the purchase of
      gasoline to only authorized employees and for PHA
      use.

8B.   Adopt controls to verify billings from the City to
      assure that gasoline purchases were accurate and that
      proper procedures were followed to obtain the
      gasoline.

8C.   Provide additional documentation for the unsupported
      costs so that an eligibility determination can be made.

8D.   Reimburse from non-Federal funds, the amount of any
      unsupported costs determined to be ineligible.




       Page 47                                  96-NY-204-1004
Finding 8




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96-NY-204-1004                   Page 48
                                                                                            Finding 9




     Ineligible and Unsupported Payments From
                  Operating Account

The PHA's Finance Department did not maintain adequate control over the disbursement of project
funds as required by the terms and conditions of the ACC and OMB Circular A-87. The controls are
inadequate because no procedures were established to ensure that costs are eligible and properly
supported prior to incurrence. As a result, the PHA has charged its LRH program with ineligible and
unsupported costs totaling $5,765.61 and $21,511.49 respectively.




                                      Our original review of selected disbursements disclosed a wide
 Review was expanded
                                      variety of deficiencies and payments for ineligible and
                                      unsupported costs. Accordingly, the review was expanded to
                                      include disbursements throughout the entire audit period.
                                      However, the items contained in this finding should not be
                                      considered to be all inclusive; rather, they represent only those
                                      ineligible and unsupported costs that were found as a result of
                                      our review.

                                      Examples of some of the types of the ineligible and
 Example of the ineligible
                                      unsupported costs are:
 and unsupported costs
                                      Ineligible Costs

                                      Includes the payment of penalties, and duplicate charges.
                                      Unsupported Costs

                                      Includes the payment of dues and food costs for the former
                                      Chairwoman at a private club; flowers as condolence for
                                      employees' family members; Christmas flowers for homes of
                                      Executive Director and Board members; contributions;
                                      instances of food costs at restaurants and catered; fees for
                                      sponsoring floats in holiday parade; reception for being
                                      removed by HUD from "troubled status"; invitations to the
                                      reception; PHA Christmas party; and purchase of Christmas
                                      cards etc.




                                               Page 49                                    96-NY-204-1004
Finding 10



                         The above ineligible and unsupported costs are further
                         identified and explained in Appendix D of this report.

                         Attachment B of OMB Circular A-87 provides the standards
 Criteria
                         for the determination of allowable and unallowable costs.
                         Section 101 Part II of the ACC provides that each project
                         shall be undertaken in such a manner that it will be developed
                         and administered to promote serviceability, efficiency,
                         economy and stability and to achieve the economic and social
                         well-being of the tenants. In addition, Section 406(B), Part II
                         of the ACC provides that operating expenditures must be
                         necessary for the operation of a project.

                         We believe that the incurrence of many of the costs included
                         in this finding has deprived the affected projects of revenues
                         needed for operations. Accordingly, the ineligible costs
                         should be repaid from non-Federal funds and the PHA should
                         be required to submit further documentation and justification
                         for the unsupported costs.



Recommendations          We recommend that you require the PHA to:

                         9A.    Establish procedures within the Finance Department
                                that will eliminate the further abuse of operating funds.
                                The procedures should ensure that prior to incurrence,
                                costs be reviewed and certified as eligible and in
                                accordance with program requirements, and that the
                                costs contain supporting documentation that will meet
                                the necessary and reasonable requirements.

                         9B.    Reimburse the appropriate operating account, from
                                non-Federal funds, the amount of the ineligible costs.

                         9C.    Provide additional documentation and justification for
                                the unsupported costs so that an eligibility
                                determination can be made.

                         9D.    Reimburse from non-Federal funds, the amount of any
                                unsupported costs determined to be ineligible.


                 Questionable Car Lease Costs

96-NY-204-1004                    Page 50
                                                                                          Finding 10




The PHA incurred costs which in our opinion were not necessary and/or reasonable. The costs were
incurred to lease three new vehicles; two for PHA officials and one for the Apartment Turn Over
(ATO) crew. The vehicles were leased because the former Chairwoman directed they be leased. As
a result, the costs amounting to $19,648.06 are considered to be unsupported pending an eligibility
determination.




                                      Our review showed that the PHA leased new vehicles for the
 Three vehicles leased
                                      former Program Administrator of the Urban Revitalization
                                      Demonstration (URD) program; the Executive Director, and
                                      the ATO crew. The details pertaining to each vehicle through
                                      the time of our review at September 30, 1995 are as follows:

                                      1995 Luxury Grand Marquis - Former URD Program
 Lease provisions and
                                      Administrator.
 vehicle information
                                      •   Lease cost with maintenance is $613 per month or $7,356
                                          per year. Total cost for three year lease period is $22,068.

                                      •   Lease provides 20,000 free miles per year, rather than the
                                          customary 10,000 to 15,000.

                                      •   Lease provides full maintenance at cost of $100 per
                                          month, even though the new car warranty would still be in
                                          effect.

                                      •   Leased without utilizing State contract to ensure that the
                                          best price was obtained.

                                      •   Purchase Order signed by former Chairwoman.

                                      •   In a letter to the former Chairwoman on November 13,
                                          1995, HUD advised that the lease arrangement was clearly
                                          excessive, inappropriate and unreasonable.

                                      •   Vehicle was leased beginning on May 19, 1995, thus the
                                          costs incurred to September 30, 1995 of $2,709.06 are
                                          considered to be unsupported.



                                               Page 51                                   96-NY-204-1004
Finding 10



                 1994 Mercury Grand Marquis - Executive Director

                 •   Lease cost with maintenance is $547 per month, or $6,564
                     per year. Total cost for the two year lease period is
                     $13,128.

                 •   Lease provided for 30,000 free miles per year, rather than
                     the customary 10,000 to 15,000.

                 •   Lease provides full maintenance cost of $37 per month
                     even though the new car warranty would still be in effect.

                 •   Purchase Order and purchase requisition signed by the
                     former Chairwoman.

                 •   Vehicle was leased in September 1994. Thus, the costs
                     incurred to September 30, 1995 of $7,111 are considered
                     to be unsupported.

                 1993 Ford Aerostar - Apartment Turn Over Crew

                 •   Lease cost is $378 per month or $4,536 per year. Total
                     cost for the three year lease period is $13,608.

                 •   Lease Agreement and Purchase Requisition were signed
                     by the Modernization Specialist rather than the designated
                     PHA official.

                 •   Vehicle was leased in August 1993. Thus, the costs
                     incurred to September 30, 1995 of $9,828 are considered
                     to be unsupported.

                 OMB Circular A-87, provides that, to be allowable under a
 Criteria
                 grant program, costs must be necessary and reasonable for
                 proper and efficient administration of the program. In
                 addition, Section 406, Part II of the ACC stipulates that costs
                 must be necessary and reasonable.

                 The two PHA officials assigned the vehicles advised that their
                 employment contract stipulates they be provided a leased
                 vehicle. In this regard, Section 5 of their employment contract
                 specifies that: "The Authority hereby recognizes that the
                 duties performed by the Employee require the regular use of
                 an automobile. As such, the Authority shall provide Employee


96-NY-204-1004            Page 52
                                                                     Finding 10



                  with an Authority-owned and/or leased vehicle for use by the
                  Employee."

                  We reminded the officials that since the PHA maintains its
                  own fleet of vehicles, it may not be necessary and/or
                  reasonable to lease additional vehicles. Also, HUD has already
                  advised the PHA that the lease arrangement for the former
                  URD Program Administrator's vehicle was clearly excessive,
                  inappropriate, and unreasonable. Therefore, the cost of
                  $19,648.06 to lease the vehicles is considered unsupported
                  pending a HUD eligibility determination.



Recommendations   We recommend that you require the PHA to:

                  10A.       Adopt controls to ensure that costs meet the
                             necessary and reasonable requirements, prior to
                             incurrence.

                  10B.       Provide additional documentation and/or
                             justification for the unsupported costs so that an
                             eligibility determination can be made.

                  10C.       Reimburse from non-Federal funds, the amount of
                             any unsupported costs determined to be ineligible.




                          Page 53                                   96-NY-204-1004
Finding 10




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96-NY-204-1004                   Page 54
                                                                                          Finding 11




       Improprieties Associated With Travel and
                   Conference Costs

Throughout the audit period, the PHA paid for travel costs that violated not only the terms and
conditions of the ACC, but the provisions of its own policy as well. The violations occurred because
the officials responsible for administering travel disregarded the requirements. As a result, the PHA
has charged its LRH program with ineligible and unsupported travel costs totaling $10,855.13 and
$5,289 respectively.




                                      During a probe conducted under Operation Safe Home in
 OIG probe indicates travel
                                      April 1994 various indications of deficiencies related to travel
 abuses
                                      and out-of-town conference costs were noted. Accordingly,
                                      travel and out-of-town conference costs for the entire audit
                                      period were reviewed.

                                      Some of the improprieties and weaknesses in the controls over
 Travel cost improprieties
                                      the accounting for travel costs are:

                                      •   Travelers do not prepare travel vouchers. Instead, per
                                          diem for both employees and Commissioners is pre-
                                          determined, paid in advance, and not reconciled. The
                                          failure to prepare travel vouchers and to reconcile travel
                                          advances with travel costs violates Section 307(c) Part II
                                          of the ACC and Paragraph 21, Chapter 4 of the Low-Rent
                                          Housing Accounting Handbook, 7510.1.

                                      •   Per diem is based on the number of nights lodging
                                          involved which is contrary to the PHA's travel policy. The
                                          policy for employees provides for per diem to be
                                          computed based on six hour increments for the day of
                                          departure and the day of return. Conversely, the policy
                                          for Commissioners provides for a full days per diem for
                                          the day of departure and the day of return regardless of
                                          the departure or return times.

                                      •   The travel policy provides for a different per diem rate for
                                          Commissioners than for employees. Per diem for



                                               Page 55                                   96-NY-204-1004
Finding 11



                                  Commissioners is set at $65 per day, whereas employees
                                  receive $50 per day.

                              •   The travel policy provides for first class and pullman
                                  accommodations when traveling by train. Such a
                                  provision appears contradictory to Paragraph 1 of the
                                  travel policy which provides for travel costs, which are
                                  necessary to enable the PHA to operate its program
                                  economically and efficiently.

                              •   A total of 14 persons, including Commissioners and
                                  employees, attended all or part of two League of
                                  Municipalities Conferences in Atlantic City, New Jersey
                                  during 1993 and 1994. However, Paragraph 5 of the
                                  PHA's travel policy provides that attendance at
                                  conferences, conventions, and meetings shall be limited to
                                  the number of persons necessary to cover the meeting
                                  adequately.


                              The types of ineligible and unsupported travel costs are:
 Examples of the ineligible
 and unsupported costs
                              Ineligible Travel Costs

                              Includes the payment of per diem and/or room cost for several
                              days before and/or after the time of conferences or training;
                              the payment for breakfast, room service and cafe charges since
                              per diem was already paid; travel and meal costs for training
                              held in the City of Camden, and room costs for an ineligible
                              traveler.

                              Unsupported Travel Costs

                              Includes the payment of per diem without any departure or
                              return time provided, and a payment to a travel agency that
                              includes ineligible room costs which neither the travel agency
                              nor the PHA could readily determine.

                              The ineligible and unsupported travel costs are further
                              identified and explained in Appendix E of this report.

                              Paragraph 1 of the PHA's travel policy provides only for the
 Criteria
                              reimbursement of travel costs which are necessary to enable
                              the PHA to operate its program economically and efficiently.


96-NY-204-1004                         Page 56
                                                                     Finding 11



                  Section 307(c) Part II of the ACC provides that the PHA shall
                  maintain complete records with respect to employees official
                  travel and vouchers supporting reimbursement of travel
                  expense.

                  Paragraph 21, Chapter 4 of the Low-Rent Housing
                  Accounting Handbook, 7510.1 provides in part that travel
                  vouchers submitted for reimbursement shall state the date and
                  hour of departure, the date and hour of arrival, and shall set
                  forth in detail the expenses for which reimbursement is sought.
                  Travel vouchers shall also conform to the established travel
                  regulations.

                  We believe that the incurrence of many of the costs cited in
                  this finding has deprived the housing programs of needed
                  revenues. In this regard, the PHA needs to adopt and
                  implement a travel policy that will provide for an economical
                  and efficient use of program funds. Therefore, the ineligible
                  costs should be repaid from non-Federal funds and the PHA
                  should be required to provide HUD with further
                  documentation and justification for the unsupported costs.



Recommendations   We recommend that you require the PHA to:

                  11A.   Adopt a travel policy and related controls to ensure
                         that all travel costs are necessary and reasonable and
                         in compliance with the ACC and HUD Handbook
                         7510.1.

                  11B.   Justify the higher per diem rate of $65 per day for
                         Commissioners. HUD should advise the PHA of its
                         determination on the rate.

                  11C.   Reimburse, from non-Federal funds the amount of the
                         ineligible costs.

                  11D.   Provide additional documentation and justification for
                         the unsupported costs so that an eligibility
                         determination can be made.

                  11E.   Reimburse, from non-Federal funds, the amount of any
                         unsupported costs determined to be ineligible.



                           Page 57                                  96-NY-204-1004
Finding 11




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96-NY-204-1004                   Page 58
                                                                                         Finding 12




       Need to Improve Controls Over Inventory

The PHA has not established controls to ensure that assets are properly recorded and controlled as
required by the ACC. Consequently, equipment is not properly accounted for and is susceptible to
theft and/or unauthorized use. We attribute the weaknesses in controls over inventory to the lack of
written policies and/or procedures related to the accountability and safeguarding of assets.




                                      Some of the deficiencies identified based on our review of the
                                      PHA controls over assets and with specific purchases of
                                      equipment are as follows:

                                      Annual inventories of nonexpendable equipment and fixed
 Annual inventories not
                                      assets are not being conducted and past Independent
 conducted
                                      Accountant (IPA) audits have repeatedly criticized the PHA
                                      for not conducting an inventory. Also, the PHA has not
                                      prepared or maintained property ledger records or insured that
                                      the items of equipment contained inventory control tags. The
                                      lack of conducting annual inventories, tagging all items of
                                      equipment and maintaining complete and accurate property
                                      ledger records, precludes the PHA from sufficiently
                                      safeguarding assets and prevents the PHA from ensuring that
                                      the amounts recorded on the books and the financial
                                      statements are accurate.

                                      In addition, instances were noted where equipment was
                                      purchased by the PHA but not delivered to Central Supply.
                                      This prevents Central Supply from accounting for all
                                      purchases of equipment and not only hinders internal checks
                                      and balances but further diminishes the PHA's control over its
                                      assets.

                                      Examples of the lack of control over assets is evidenced by
                                      purchases of ranges and refrigerators; beepers; computers and
                                      cellular phones. The deficiencies associated with the
                                      purchases show that funds have been expended to purchase
                                      assets which are not accounted for; serial numbers on
                                      equipment do not always agree with serial numbers on




                                               Page 59                                  96-NY-204-1004
Finding 12



                 property records; and, Central Supply does not always record
                 the serial numbers for equipment at the time of receipt.

                 Ranges and refrigerators

                 Our physical inspection of a total of 76 ranges and
                 refrigerators placed in service from March 1994 through May
                 1995 showed a deficiency rate in excess of 20 percent. The
                 deficiencies found include:

                 •   Central Supply records showed two ranges located in the
                     same unit. The unit contained only one range. Thus, the
                     location of the other range could not be verified.

                 •   Several ranges and refrigerators were shown as being
                     located in vacant units. However, the appliances were not
                     in the units at the time of our inspection.

                 •   No location was shown for one range.             Thus, the
                     appliance could not be accounted for.

                 •   Other ranges and refrigerators inspected showed serial
                     numbers which did not agree with those shown in the
                     Central Supply inventory records.

                 Beepers

                 Our verification of 61 beepers consisted of either comparing
                 the serial numbers from the control list to the beeper or by
                 dialing the beeper for a response.

                 •   Of the 61 beepers assigned, three did not respond and four
                     others could not be located because the control list did not
                     show a serial number.

                 •   Five other beepers were located but had different serial
                     numbers than those shown on the control list.

                 •   12 of the 61 beepers identified on the control list did not
                     show a serial number for the beeper, even though the
                     individuals assigned the beepers responded to our call.


                 Computer Equipment


96-NY-204-1004             Page 60
                                                              Finding 12



           •   Various computer equipment was purchased but was not
               delivered to Central Supply.

           •   Several recent police reports showed that three computer
               hard drives and one laser printer were stolen. However,
               neither the printer nor two of the hard drives were
               included on the control list provided and the equipment
               had not been written off.

           •   The PHA was unable to provide a control list for portable
               lap top computer printers. However, a review of
               disbursements showed that eight printers were purchased.
               One of the printers could not be located and PHA officials
               advised that the former Chairwoman had the printer.

           •   Apart from the control list that was provided for computer
               equipment, our inspection showed many other items of
               computer equipment that were not on the control list.

           Cellular Phones

           Our review of the PHA's control list for 19 cellular phones
           showed:

           •   We were unable to account for one car phone assigned to
               the former Chairwoman, PHA officials informed that the
               former Chairwoman was contacted and asked to return the
               phone. However, it was not returned at the time of our
               review.

           •   Four other phones on the control list could not be located.

           HUD Handbook 7510.1, Chapter 7, paragraphs 5c and 5g,
Criteria
           provide that fixed asset accounts for nonexpendable
           equipment shall be supported by equipment records, and that
           once a year the PHA must take a physical inventory and
           reconcile differences between the inventory and the records.
           Moreover, Section 309 of the ACC requires records be keep
           in condition to permit speedy and effective audit, and to keep
           property records which shall include an annual inventory of all
           equipment.

           We believe that deficiencies similar to those identified above
           will recur unless the PHA takes corrective actions to establish


                    Page 61                                  96-NY-204-1004
Finding 12



                 adequate controls over non-expendable equipment. The
                 PHA's current system of accounting for assets promotes,
                 rather than eliminates, potential abuses to equipment and puts
                 at risk its scare resources, including those provided by HUD,
                 to fund the purchasing of such equipment.

                 Recommendations

                 We recommend that you require the PHA to:

                 12A.       Establish controls to ensure that assets are
                            properly recorded and controlled.

                 12B.       Institute procedures that will require an annual
                            inventory of all equipment.

                 12C.       Implement controls that will ensure that all items
                            of nonexpendable equipment are purchased and
                            delivered through Central Supply so that adequate
                            control and accountability can be maintained.




96-NY-204-1004           Page 62
                                                                                          Finding 13




       Need to Improve Administrative Controls

Our review showed various noncompliances pertaining to administrative controls and procedures that
have weakened the PHA's system of internal control. The noncompliances occurred because
procedures and/or practices were not implemented to ensure that adequate administrative controls
were executed to meet program requirements. As a result, the PHA does not have assurance that
funds are properly safeguarded against waste and loss and that its housing programs are administered
in accordance with Federal regulations and requirements.




The following items should not be considered to be all inclusive; rather, they represent only those
noncompliances that were identified as a result of our review.

                                      a. The review showed various instances where the PHA paid
 Administrative control
                                         costs such as sales taxes and parking fines. The PHA is
 deficiencies
                                         exempt from State sales tax and OMB Circular A-87
                                         specifically identifies the payment of fines and penalties as
                                         unallowable costs.

                                      b. The former Chairwoman not only signed checks but also
                                         approved various purchase orders and purchase
                                         requisitions and even approved some invoices for
                                         payment. Effective internal controls should provide for an
                                         adequate segregation of duties in order to provide some
                                         control over the safeguarding of assets.

                                      c. Several administrative improprieties associated with travel
                                         and conference costs were noted that include:

                                              1. Travelers do not prepare travel vouchers.
                                              2. Per diem for both employees and Commissioners
                                                 is paid in advance and not reconciled.
                                              3. Travel costs including per diem and room costs
                                                 were paid for several days before or after the time
                                                 of the conferences, training etc.

                                      Paragraph 1 of the PHA's travel policy provides that
                                      reimbursement for travel expenses shall cover only those costs




                                               Page 63                                   96-NY-204-1004
Finding 13



                 which are necessary to enable the PHA to operate its program
                 economically and efficiently.

                 d. The PHA did not execute formal contracts for costs
                    associated with a Parking Study conducted by the Camden
                    Parking Authority and for costs associated with gasoline
                    purchases from the City of Camden. The failure to execute
                    written contracts on inter-governmental agreements
                    prevents the parties from obtaining a clear understanding
                    of the services to be provided and also reduces the PHA's
                    legal position in the event of default.

                 e. Various control deficiencies were noted involving the
                    purchase of gasoline from the City that include:

                    1. Vehicle receiving gas was not a PHA vehicle.
                    2. Gasoline purchased for former Chairwoman's vehicle.
                    3. No authorization shown or improper authorization
                       shown.
                    4. Driver purchasing the gas was not a PHA employee.
                    5. Quantity of gasoline purchased exceeded fuel tank size
                       on vehicle.
                    6. Driver did not sign the Daily Fuel Disbursement
                       Records as required.
                    7. Some of the footings by the City on the Daily Fuel
                       Disbursement Record were incorrect which means the
                       amount charged was incorrect.

                 Effective administrative controls should provide for proper
                 review of the documentation submitted for costs charged in
                 order to determine that the costs are eligible and proper.

                 f. A vehicle lease agreement and Purchase Requisition were
                    signed by the Modernization Specialist rather than the
                    designated official. The PHA's system of control should
                    ensure that only authorized officials execute documents on
                    the PHA's behalf.

                 g. Various payments were made by the PHA without the
                    benefit of Purchase Orders or Purchase Requisitions to
                    authorize or support the propriety of the payment. Sound
                    administrative control would dictate that Purchase Orders
                    and Requisitions be executed for goods and services
                    obtained.


96-NY-204-1004           Page 64
                                                   Finding 13



h. The PHA has failed to conduct annual inventories of
   nonexpendable equipment and properly tag and centrally
   control purchases of equipment. Chapter 7, Paragraph 5g.
   of the Low-Rent Housing Accounting Handbook, 7510.1
   requires a physical inventory of nonexpendable equipment
   be made at least once a year and that differences be
   adjusted by authorized officials.

i. Instances were noted during the review where duplicate
   payments were made for goods or services. Making
   duplicate payments illustrates that a proper review of bills
   and invoices is not performed prior to payment.

j. Instances were noted where the PHA expended operating
   funds for expenses relating to other programs such as
   Modernization and DEP. HUD requires a separate
   accounting and classification of expenditures under each
   of its programs.

k. A review of the PHA's three petty cash funds showed:

   1. The Finance Department petty cash fund exceeded the
      amount recorded on the books and the amount on the
      books did not agree with the amount authorized by the
      Board resolution. Various instances were also noted
      where petty cash was used for large or unusual
      purchases.

   2. Payment for an accident report pertaining to an
      incident in Philadelphia, PA. and payment for a
      purchase supported by a hand written receipt that did
      not identify the vendor, were noted during a review of
      the Modernization Department petty cash fund.In
      addition, the vouchers maintained in the fund were not
      numbered.

   3. In an attempt to account for the Operations
      Department petty cash fund, the custodian informed
      that all funds and vouchers were submitted to the
      Finance Department and therefore, there were no
      funds to count at the time of our visit on December
      12, 1995. However, a review of the bank statement
      and cancelled checks showed that the custodian had
      endorsed and cashed a petty cash replenishment check


         Page 65                                  96-NY-204-1004
Finding 13



                         on December 11, 1995 for $302.34 that was issued by
                         the PHA on December 5, 1995.

                  Chapter 3, Section 1 of the Low-Rent Housing Accounting
                  Handbook, 7510.1 provides for a petty cash fund as an
                  imprest fund for the payment of minor expenses. Moreover,
                  Section 309 Part II of the ACC provides that the PHA shall
                  maintain complete and accurate books of accounts and
                  records.

                  The above deficiencies have reduced the PHA's ability to
                  establish a reliable system to evaluate its overall housing
                  program performance. Unless corrective actions are
                  implemented, deficiencies similar to those described above will
                  recur.



Recommendations   We recommend that you require the PHA to:

                  13A.   Establish controls to ensure that invoices and billings
                         containing ineligible costs, such as sales taxes and
                         parking fines are not processed for payment.

                  13B.   Implement procedures that will ensure an adequate
                         segregation of duties among officials and employees.

                  13C.   Establish procedures that will ensure that travel and
                         conference costs conform not only to its travel policy
                         but with HUD requirements as well.

                  13D.   Institute procedures that will require that written
                         contracts be executed on intergovernmental
                         agreements.

                  13E.   Adopt controls that will ensure that supporting
                         documentation is thoroughly reviewed and accepted
                         prior to cost incurrence.

                  13F.   Establish procedures that will ensure that only
                         authorized officials execute documents on the PHA's
                         behalf.




96-NY-204-1004             Page 66
                                                   Finding 13



13G.   Institute controls that will ensure that Purchase Orders
       and Purchase Requisitions be executed for all goods
       and services obtained.

13H.   Implement controls that will assure that an annual
       inventory is conducted for all nonexpendable
       equipment and that the equipment is labeled and
       centrally controlled.

13I.   Establish procedures to ensure that bills and invoices
       are thoroughly reviewed to preclude duplicate
       payments.

13J.   Adopt procedures that will ensure that expenses are
       properly classified and charged the appropriate
       program.

13K.   Maintain effective control over its Petty Cash Funds
       by:

       1. Periodically reconciling petty cash funds with book
          balances.
       2. Requiring submission of adequate supporting
          documentation prior to disbursement of petty cash
          funds.
       3. Limiting the use of petty cash funds to small non-
          routine type purchases.
       4. Reconciling the petty cash fund maintained by the
          Operations Department.




        Page 67                                   96-NY-204-1004
Finding 13




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96-NY-204-1004                   Page 68
Internal Controls
In planning and performing our audit, we evaluated the internal controls of the PHA 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 integrity, ethical values, competence,
and the control environment which includes establishing objectives, risk assessment, information
systems, control procedures, communication, managing change, and monitoring.




                                       Our audit objectives related to the following internal controls
 Internal controls assessed
                                       that we assessed:

                                       •   Controls over the administration of its HUD programs.

                                       •   Controls over disbursements.

                                       •   Controls over supporting documentation for costs.

                                       •   Controls over procurement and contracting.

                                       •   Controls over personnel procedures.

                                       •   Controls over payroll.

                                       •   Controls over travel.

                                       •   Controls over gasoline usage.

                                       •   Controls over leasing of vehicles.

                                       •   Controls over property and equipment.

                                       A significant weakness exists if internal controls do not give
                                       reasonable assurance that: (a) resource use is consistent with
                                       laws, regulations, and policies; (b) resources are safeguarded
                                       against waste, loss and misuse; and (c) reliable data are
                                       obtained, maintained, and fairly disclosed in reports.

                                       Our review identified the following significant internal control
 Assessment results.
                                       weaknesses:




                                                Page 69                                   96-NY-204-1004
Internal Controls



                    •   Controls over the administration of its HUD programs
                        (Findings 1, 3 and 7).

                    •   Controls over disbursements (Findings 2,3,5,7,8,9,11 and
                        13).

                    •   Controls over supporting documentation for costs
                        (Findings 2,3,5,7,8,9,11 and 13).

                    •   Controls over procurement and contracting (Findings
                        2,6,8 and 13).

                    •   Controls over personnel procedures (Finding 4).

                    •   Controls over payroll (Finding 5).

                    •   Controls over travel (Finding 11).

                    •   Controls over gasoline usage (Finding 8).

                    •   Controls over leasing of vehicles (Finding 10).

                    •   Controls over property and equipment (Finding 12).




96-NY-204-1004               Page 70
Follow Up On Prior Audits
A prior audit of the PHA was performed by an Independent Auditor (IA) for the twelve month period
ended December 31, 1994. The report contained two findings which remained opened as of March
31, 1995, the end of our audit period. One finding shows that the PHA did not perform an annual
inventory of equipment or properly account for non-expendable equipment. This report also contains
a finding on controls over equipment (see Finding 12). The other finding indicates that modernization
accounting is not done by phase, project, or work item. The PHA has submitted correspondence to
HUD to resolve the deficiencies.




                                               Page 71                                   96-NY-204-1004
Follow Up On Prior Audits




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96-NY-204-1004                       Page 72
                                                                                      Appendix A

Schedule of Ineligible and Unsupported Costs,
and Cost Efficiencies
       Finding                                                                     Cost
       Number               Ineligible (1)           Unsupported (2)          Efficiency (3)
           2                                               $733,391.57
           3                       $5,472.14                607,834.60
           4                                                219,373.00
           5                                                 71,231.00
           6                                                 50,000.00
           7                       15,555.55                 39,998.94
           8                                                 14,506.00              $33,239.46
           9                        5,765.61                 21,511.49
          10                                                 19,648.06
          11                       10,855.13                  5,289.00
       TOTAL                     $37,648.43              $1,782,783.66              $33,239.46


(1) Costs clearly not allowed by law, contract, HUD or local agency policies and regulations.

(2) Costs not clearly eligible or ineligible but warrant being contested (e.g. lack of satisfactory
    documentation to support the eligiblity of the costs, etc.).

(3) A cost efficiency is an action by management in response to the Inspector General's
    recommendations to prevent improper obligation or expenditure of funds or to avoid further
    unnecessary expenditures.




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Appendix A




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96-NY-204-1004                   Page 74
                                                                         Appendix G

Distribution
Director, Office of Public Housing, 2FP (2)
Secretary's Representative, New York/New Jersey, 2AS
Director, Accounting Division, New York/New Jersey, 2AAF
Special Assistant, New Jersey State Office, 2FS (3)
New Jersey State Coordinator, 2FS
Assistant to the Deputy 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)
Chief Financial Officer, F (Room 10164) (2)
Deputy Chief Financial Officer, FF (Room 10164) (2)
Associate General Counsel, Office of Assisted Housing and Community
Development, CD, Room 8162
Field Comptroller, Midwest Field Office, 5AF
Assistant Director in Charge, US GAO, 820 lst Street, NE Union
Plaza, Building 2, Suite 150, Washington, DC (2)
Executive Director, Camden Housing Authority, Camden, New Jersey




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