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
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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.
Page 73 96-NY-204-1004
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
Page 109 96-NY-204-1004
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)