oversight

HA of the County of Chester, West Chester, PA

Published by the Department of Housing and Urban Development, Office of Inspector General on 1996-07-16.

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

                                                                   Issue Date

                                                                        July 16, 1996
                                                                   Audit Case Number

                                                                        96-PH-202-1018




TO:           Malinda Roberts, Acting Director, Office of Public Housing,
               Pennsylvania State Office, 3APH


FROM:         Edward F. Momorella, District Inspector General
               for Audit, Mid-Atlantic, 3AGA

SUBJECT:      Housing Authority of the County of Chester
              Public Housing Activities
              West Chester, Pennsylvania


We audited the public housing activities of the Housing Authority of the County of Chester
(Authority). The purpose of the audit was to determine if the Authority administered its public
housing activities in an efficient, effective, and economical manner, and operated within
applicable regulations and laws.

The Authority did not operate in an efficient, effective and economical manner. Improvements
are needed in the overall management of the Authority's operations and in the maintenance of the
Authority's projects.

Within 60 days, please give us, for each recommendation made in the report, a status report on:
(1) the corrective action taken; (2) the proposed corrective action and date to be completed; or
(3) why action is considered unnecessary. Also, please furnish us with copies of any
correspondence or directives issued because of the audit.

Should your staff have any questions, please have them contact J. Phillip Griffin, Assistant
District Inspector General for Audit, at (215) 656-3401.
Management Memorandum




96-PH-202-1018          Page ii
Executive Summary
The audit objectives were to determine if the Authority administered its public housing activities
in an efficient, effective, and economical manner, and complied with the terms and conditions
of HUD regulations and applicable laws.



                                     The Authority did not administer its public housing
 Authority management
                                     activities in an efficient, effective, and economical manner,
 has not been efficient,
                                     or in compliance with laws and regulations. Several key
 effective, and economical
                                     positions remained vacant for extended periods which led
                                     to the Authority's operations being without direction and
                                     accountability. Specifically, the Authority did not:

                                     •   Fill key vacancies in a timely manner;

                                     •   Adequately implement necessary policies and
                                         procedures for several areas (Tenants Accounts
                                         Receivable, Admissions and Occupancy, Procurement,
                                         Internal Controls Over Cash, and Travel);

                                     •   Properly check employee qualifications; and

                                     •   Correct deficiencies cited in HUD management reviews.

                                     Because there were no policies and procedures governing
                                     travel by staff and Board members, the Authority paid
                                     $15,791 in unsupported travel costs.

                                     Also, the Authority did not maintain its projects in good
 Maintenance operations
                                     repair and condition. Vacant units are not rehabilitated in
 need to be improved
                                     a timely manner and the work order system does not ensure
                                     repairs are completed in a timely manner. The maintenance
                                     department did not have written operating procedures, there
                                     was no preventive maintenance plan, and units were not
                                     inspected annually in ensure Housing Quality Standards
                                     were being met. Improvements are needed in tracking the
                                     materials and supplies inventory. Finally, the Authority
                                     needs to improve its supervision and evaluation of
                                     maintenance employees. As a result, residents are subject
                                     to deteriorating units and excessive time on the Authority
                                     waiting list.




                                              Page iii                                96-PH-202-1018
Executive Summary



                    We made recommendations designed to improve operations
                    at the Authority.    These recommendations include
                    procedural changes and strengthened controls. Also, we
                    recommended obtaining documentation for unsupported
                    costs.

                    We discussed the findings with Authority and HUD staff
                    during the audit, and with Authority staff at an exit
                    conference. The Authority's written response to the draft
                    findings was considered in preparing our report, and is
                    included as Appendix A. Also, we considered the oral and
                    written comments provided by HUD Pennsylvania State
                    Office Public Housing staff.




96-PH-202-1018              Page iv
Table of Contents

Management Memorandum                                          i


Executive Summary                                             iii


Introduction                                                   1


Findings

    1      Management of Authority Operations
           Should Be Improved                                  5

    2      The Authority Did Not Maintain Its
           Projects In Good Repair and Condition             21


Internal Controls                                            27


Follow Up On Prior Audits                                    29


Appendices

    A      Auditee Comments                                  31

    B      Schedule of Unsupported Costs                     37

    C      Distribution                                      39


Abbreviations
    ACC      Annual Contribution Contract
    CDBG     Community Development Block Grant


                                   Page v          96-PH-202-1018
Table of Contents



         CFR        Code of Federal Regulations
         CGP        Comprehensive Grant Program
         CIAP       Comprehensive Improvement Assistance Program
         FY         Fiscal Year
         HUD        U.S. Department of Housing and Urban Development
         HQS        Housing Quality Standards
         OIG        Office of Inspector General
         PHA        Public Housing Authority
         TAR        Tenants Accounts Receivable




96-PH-202-1018                             Page vi
Introduction
The Housing Authority of the County of Chester was organized under Pennsylvania State law to
develop and operate low-rent housing programs. The Authority administers 507 low-rent public
housing units located in seven developments. Also, the Authority has a Section 8 program
consisting of certificates, vouchers, and moderate rehabilitation units. The Authority recently
hired a new Executive Director for its operations.

The Authority administers public housing by entering into an Annual Contribution Contract
(ACC) with HUD. The Authority's ACC is dated June 5, 1964. Financial assistance from HUD
to the Authority includes:

       •   annual operating subsidies to operate and maintain its housing developments,

       •   modernization/comprehensive grant funds to upgrade units, (CIAP/CGP)

       •   drug elimination grant funds,

       •   Hope 1 grant funds

       •   Youth Sports

Community Development Block Grant (CDBG) funds.

The Authority received $1.2 million in operating subsidy for fiscal year 1994 and $1.1 million
for fiscal year 1993.

The Authority has a five member Board of Commissioners, and George H. Hemcher is the
Chairperson. The Authority's Executive Director is Troy L. Chapman. The Authority's Central
Office is located at 222 No.Church Street in West Chester, Pennsylvania.



                                    The primary objectives of the audit were to determine
 Audit Objectives
                                    whether the Authority was:

                                    •      administering its public housing programs in an
                                           efficient, effective, and economical manner, and

                                    •      in compliance with the terms and conditions of its ACC,
                                           applicable laws, HUD regulations, and other applicable
                                           directives.




                                                Page 1                                96-PH-202-1018
Introduction



                   Audit work was performed in 1994 and 1995 and covered
 Audit Period
                   the period January 1993 through November 1994. Where
                   appropriate, the review was extended to include other
                   periods.

                   We reviewed the Authority's general administration to
 Audit Scope and
                   evaluate the areas of staffing and responding to HUD
 Methodology
                   management reviews.

                   We reviewed the Authority's system for collection of rents
                   to determine whether the Authority was implementing its
                   rent collection policy. We reviewed tenants accounts
                   receivable for the period January 1993 through October
                   1994. In addition, we reviewed the Authority's write offs of
                   uncollectible tenants accounts receivable.

                   A review of the Authority's admission and occupancy
                   practices was performed to determine the efficiency,
                   effectiveness, and economy of Authority operations in these
                   areas.

                   We reviewed the Authority's procurement practices to
                   determine if the Authority purchased goods and services at
                   the lowest reasonable cost and in accordance with its
                   procurement policy. We judgmentally selected and
                   reviewed 15 rehabilitation contracts.

                   We conducted a review of the Authority's internal controls
                   and cash management. The purpose of the review was to
                   determine whether the Authority's internal controls over
                   operations were adequate to ensure an efficient, effective,
                   and economical operation, and whether cash assets were
                   adequately safeguarded.      We tested the Authority
                   procedures for cash receipts and disbursements, and
                   performed cash counts and bank reconciliations.

                   Also, we reviewed the Authority's practices related to travel
                   by the staff and Board to evaluate the efficiency,
                   effectiveness, and economy of Authority operations in this
                   area.




96-PH-202-1018              Page 2
                                                Introduction



We reviewed the Authority's maintenance operations to
evaluate the efficiency, effectiveness, and economy of the
maintenance department. We inspected one development
that included 192 units to determine whether the Authority
was providing decent safe and sanitary units to its residents.
Also, we evaluated the Authority's work order system, its
control over inventory and its ability to rehabilitate vacant
units in a timely manner.

We conducted the audit in accordance with generally
accepted government auditing standards.




         Page 3                                   96-PH-202-1018
Introduction




96-PH-202-1018   Page 4
                                                                                        Finding 1




  Management of Authority Operations Should
                Be Improved

The Authority has several staffing vacancies that have gone unfilled for up to 2 years. These
vacancies affected the Authority's ability to manage PHA activities efficiently, economically, and
effectively. Thus, the stability and direction of management operations has diminished.
Additionally, the Authority did not: adequately implement numerous vital policies and
procedures; ensure employees met minimum qualifications; and correct deficiencies cited in HUD
management reviews. This occurred because management did not promptly make administrative
decisions. As a result of the above, the Authority lacks proper control over its management
functions.



                                     1. Key vacancies were not filled timely.
 Important positions open
 too long
                                     The Authority did not fill key administrative positions in a
                                     timely manner. During most of our audit, the Authority had
                                     no permanent Executive Director, Accountant, or
                                     Maintenance Superintendent. The positions were vacant for
                                     as long as two years. These vacancies are directly
                                     attributable to the current condition of the Authority's
                                     operations. In addition, the Authority has 11 other vacant
                                     positions.

                                     According to the Acting Executive Director, the positions
                                     are Civil Service positions and candidates must be selected
                                     from the Civil Service list. Further, she stated the Authority
                                     had difficulties finding suitable candidates from that list.

                                     2. Necessary policies and procedures were not adequately
 Authority needs essential
                                        implemented.
 policies implemented
                                     The Authority was using personnel, procurement, and other
                                     required policies without HUD approval. Recent HUD
                                     management reviews cited that the Authority's policies
                                     governing personnel, admissions and occupancy, tenant
                                     grievance, and procurement should be updated. Authority
                                     personnel said they submitted the updated operating
                                     policies to HUD for review but HUD had not responded.



                                              Page 5                                   96-PH-202-1018
Finding 1



                              Areas of improvement for the Authority are as follows:

                              a.   Tenants Accounts Receivable
                              b.   Admissions and Occupancy
                              c.   Procurement
                              d.   Internal Controls Over Cash
                              e.   Travel

                              These areas and the problems we noted during our audit are
                              discussed in the following sections.

                              a. Tenants Accounts Receivable
 Delinquent rent and bad
 debts are high
                              Of the Authority's current residents, 27 percent are
                              delinquent on their rents and balances for vacated residents
                              are rapidly increasing. In addition, the Authority did not
                              exercise controls over writing off balances of vacated
                              residents . The Authority did not follow its collection
                              policy requirements and did not have sufficient qualified
                              staff to implement its program. As a result, rent collections
                              are decreasing and there is no assurance that $13,592 in
                              written off resident's balances was uncollectible.

                              The Authority's rent collection policy requires rental
 Authority has a collection
                              payment on the first of each month. Further, it states that
 policy
                              during the first 5 days of the month, managers will spend
                              sufficient time contacting residents in an effort to collect
                              delinquent rent.

                              Regarding delinquent vacated residents, the Authority's
                              policy requires management to use all resources to contact
                              former residents in an effort to collect the balances. The
                              policy also states if management has not been contacted by
                              the former resident within fifteen (15) days, the amount will
                              be reviewed for forwarding to a local credit bureau for
                              collection.




96-PH-202-1018                          Page 6
                                                                                Finding 1



                        The Authority's tenants accounts receivable showed the
Delinquent rent is
                        following increases for the period January 1993 through
increasing
                        October 1994:

                                                  Number of
                                              Delinquent Tenants       Amount Owed

                                            Jan 1993     Oct 1994   Jan 1993      Oct 1994

                            Residents in
                            Possession        67             120     $11,074        $38,999

                             Vacated
                             Residents        22              94       5,339         31,940

                              Total
                            Receivables       89             214     $16,413        $70,938




                        Receivables for residents in possession increased from 14
                        to 27 percent and the total amount owed increased by 432
                        percent during the period January 1993 through October
                        1994.

                        For the year ending December 31, 1993, the Authority
                        wrote off delinquent accounts of 35 residents totalling
                        $13,592. This amount included 15 accounts for residents
                        that had moved out within three months or less. It also
                        included the account of one resident who moved out
                        December 29, 1993, owing $3,563. 61. The fee accountant
                        did not obtain the required board approval to write off the
                        accounts.

                        The Authority did not follow the requirements of its
Collection policy not
                        collection policy for delinquent accounts and did not have
followed and not
                        sufficient qualified staff to enforce its policy. Resident files
enforced
                        showed the Authority made very little effort to collect
                        delinquent accounts of residents in possession and no effort
                        to collect accounts of vacated residents. The Authority's
                        Property Management staff is responsible for collecting
                        delinquent rents. Property Management staff consisted of
                        the Property Manager and a clerk. The department has
                        three vacant Assistant Property Manager positions.
                        According to the Property Manager, they were not able to
                        enforce the collection policy because of the work load and
                        the lack of staff.

                        In addition, the Authority did not maintain an agreement
                        with a collection agency to recover accounts of vacated


                                   Page 7                                      96-PH-202-1018
Finding 1



                             delinquent residents. Authority records showed balances
                             for vacated residents were not turned over to a collection
                             agency for possible recovery of delinquent balances prior to
                             write off. Authority personnel said this part of its policy
                             somehow was overlooked.

                             Because Authority personnel did not follow collection
                             policy and ensure sufficient qualified staff were available to
                             enforce that policy, the Authority is not receiving the
                             maximum collectible rents and HUD subsidy payments are
                             increasing.

                             b. Admissions and Occupancy
 Leasing and occupancy
 process needs
                             The Authority did not: determine the eligibility of
 improvement
                             applicants before placing them on waiting lists; place
                             applicants in units according to their waiting list rank;
                             adequately maintain tenant files; recertify all tenants
                             annually; charge tenants the correct rents; and rent
                             rehabilitated vacant units in a timely manner. This occurred
                             because the Authority did not have sufficient qualified staff
                             to implement its admissions and occupancy policy. As a
                             result, applicants appeared to receive preferential treatment,
                             the Authority did not receive the maximum collectible
                             rents, and applicants waited while rehabilitated units
                             remained vacant.

                             The Authority's waiting list for public housing did not
 Eligibility of applicants
                             contain       eligible applicants.      Authority personnel
 not initially determined
                             responsible for maintaining the waiting list stated
                             applicants are placed on a waiting list whenever they fill
                             out the application. The staff does not verify information
                             proving eligibility at that time. Applicants are placed on the
                             waiting list based on the date and time the Authority
                             receives the application. Whenever a unit becomes
                             available, staff go down the waiting list and request a
                             number of applicants to provide documentation to support
                             their eligibility. The first requested applicant that provides
                             this information is placed in the unit. An applicant's rank
                             on the waiting list is not a factor. This procedure is
                             repeated each time a unit becomes available.




96-PH-202-1018                        Page 8
                                                                              Finding 1




                           Applicants are not informed of their position on the waiting
                           list. Further, applicants are told not to call the Authority
                           until they hear from staff after the application is taken.

                           Tenant files did not contain complete information and were
Tenant files lack proper
                           not in order. Our review of files noted the following:
information
                           •   Eight of ten tenant files did not contain complete
                               information.

                           •   Five of ten files showed the tenants were not recertified.


                           Missing items included leases, applications, and total tenant
                           payment calculations. It also appeared that some tenant's
                           rents were not properly calculated.

                           The Authority did not rent rehabilitated vacant units timely.
Units remain vacant too
                           The vacancy report as of November 16, 1994 showed seven
long
                           completed units. These units were completed between May
                           15 and August 23, 1994. None of the units was occupied.
                           The Authority had a list of 114 applicants for zero to three
                           bedroom units in August, 1994. Authority personnel said
                           these units were not rented because they had difficulties
                           getting applicants to move to its projects in Coatesville.

                           The Authority did not have sufficient qualified staff to
                           implement its admissions and occupancy policy. The
                           Authority's current housing management staff consisted of
                           a housing manager and a clerk. Three positions for
                           assistant housing managers were vacant.

                           As a result, applicants appeared to receive preferential
                           treatment, the Authority did not receive the maximum
                           collectible rents, and qualified applicants were required to
                           wait while rehabilitated units remained vacant.




                                    Page 9                                   96-PH-202-1018
Finding 1




                            c. Procurement
 Authority needs to
 strenthen proccurement
                            The Authority did not obtain rehabilitation contracts in
 practices
                            accordance with HUD requirements. Also, its procurement
                            practices did not ensure goods and services were obtained
                            at the lowest reasonable cost. This occurred because the
                            Authority did not comply with its own procurement policy
                            and procedures, circumvented HUD's requirements, and did
                            not ensure contractors satisfied contract
                            requirements. As a result, there was no assurance that
                            $752,458 paid to three rehabilitation contractors was a
                            reasonable expense or that contract requirements were
                            satisfied.

                            According to the Authority's procurement policy, sealed
                            bids are required for all purchases exceeding $10,000 and
                            solicitation of at least three offers and/or price quotes are
                            required for all purchases exceeding $1,000.

                            Rehabilitation Contracts
 Administration of
 rehabilitation contracts
                            The Authority did not ensure costs for rehabilitation
 was inadequate
                            contracts were reasonable or contract requirements were
                            completed. A review of the Authority rehabilitation
                            contracts showed the following:

                            •   Fifteen of 15 contracts did not have the required cost or
                                price analysis;

                            •   Nine of 15 contracts were issued based on one
                                contractor's cost estimates;

                            •   Authority specifications for contracted work did not
                                adequately identify required work; and

                            •   Completed work was not inspected by qualified staff.

                            Cost estimates for rehabilitation work were not prepared by
 Cost estimates were not
                            the Authority. Authority rehabilitation contract amounts
 prepared
                            were based on the contractors' cost estimates. Contractors
                            were asked to walk through units and submit cost estimates
                            for rehabilitation work. Although the estimated costs for
                            most of the rehabilitation contracts exceeded the amount


96-PH-202-1018                      Page 10
                                                                            Finding 1



                          requiring at least three cost estimates, the Authority issued
                          contracts when only one estimate was requested and
                          received.

                          Three contractors performed most of the Authority's
                          rehabilitation work. Since January 1991, the Authority has
                          paid the three contractors $752,458 for rehabilitation work.

                          In addition, the Authority did not prepare adequate
Specifications were not
                          specifications for required work. The Authority's written
adequate
                          specifications did not identify quantity or measurements of
                          repair items. OIG's appraiser could not establish cost
                          estimates for completed rehabilitated work because the
                          specifications were too vague.

                          The Authority did not adequately inspect contractors'
Inspections were not
                          rehabilitation work. Completed rehabilitation work was
adequate
                          inspected by the Authority's leasing manager. The leasing
                          manager did not have knowledge of rehabilitation work or
                          inspections.      She performed inspections without
                          specifications for the required work. She said the
                          inspections consisted of a check of working appliances and
                          physical appearance of the units.

                          Procurement Procedures
Procurement policy not
followed
                          Although the Authority's written procurement policy and
                          procedures appeared adequate, the Authority did not follow
                          its policy to ensure goods and services were obtained at the
                          lowest reasonable cost. The Authority's practices for
                          procuring goods and services did not include:

                          •   a contract administration system that ensures contractors
                              perform according to the terms of their contract;

                          •   written procedures to ensure duplicative              and
                              unnecessary items are not purchased;

                          •   maintaining a contract register;

                          •   maintaining an adequate list of pre-qualified contractors
                              and suppliers; and




                                  Page 11                                  96-PH-202-1018
Finding 1



                            •   provisions to ensure reduced collusion and price fixing
                                by contractors.

 The procurement process
                            Procurement practices used by the Authority circumvented
 was circumvented
                            the need for sealed bids and allowed contractors to decide
                            who would receive contracts, set the price of work items,
                            and amount of work to be performed. The following is an
                            example of the Authority's general procurement practice.
                            The Authority determined four units needed extensive
                            rehabili-tation. The Authority's purchasing agent informed
                            the four rehabilitation contractors on her list of the required
                            work. However, instead of issuing the work as one
                            contract, the Authority told the contractors to provide four
                            estimates for the units. The Authority had the contractors
                            walk through the units together and provide estimates for
                            each unit. Each of the four contractors received one of the
                            jobs and the total paid for the four contracts exceeded the
                            $10,000 threshold requiring sealed bids. The Authority did
                            not provide specifications or cost estimates for the required
                            work.

                            According to the Authority's purchasing agent, she was new
                            in the position and had not received any training. She also
                            indicated she was not aware of the requirements included in
                            the Authority procurement policy.

                            Because the Authority did not follow its procurement
                            policy, circumvented HUD requirements, and did not
                            perform adequate inspections of contractors' work, there
                            was no assurance the Authority received fair prices for
                            contracted work, and the $752,458 paid rehabilitation
                            contractors might have been excessive.

                            d. Internal Controls Over Cash
 Authority needs to
 strengthen controls over
                            The Authority's internal control system did not provide the
 cash
                            required controls over cash. The Authority did not have the
                            necessary trained staff to implement a good internal control
                            system and did not have written procedures. As a result,
                            cash assets were not safeguarded and information used to
                            make management decisions was neither reliable nor
                            accurate.



96-PH-202-1018                      Page 12
                                                                           Finding 1




                        Cash Receipts
Receipts not properly
controlled
                        The Authority did not issue receipts to tenants for rent
                        payments and HUD subsidy payments were not recorded
                        timely. Tenants are provided a monthly statement that is
                        used to make rent payments to the Authority. The
                        statements are stamped " paid" when tenants provide it with
                        the payment. Whenever tenants make payments without
                        the statement, they are given a receipt. Neither the tenants'
                        statements or the receipts provided to tenants are numbered.
                        The Authority is not able to perform a true daily
                        reconciliation of cash received through this system and the
                        safeguard of cash relies on the trustworthiness of the
                        cashier.

                        Discarded, missing, or cancelled receipts and statements are
                        not accounted for by the Authority. Because of these
                        deficiencies, we could not ascertain whether the Authority
                        accounted for all cash received or that tenants' records were
                        accurate.

                        The Authority did not record HUD subsidy receipts timely
                        or use proper documentation to ensure accuracy. HUD
                        subsidy payments are recorded from monthly bank
                        statements. The Authority personnel said neither the bank
                        nor HUD provided information when the subsidy payments
                        were credited. This practice does not allow the Authority
                        to identify possible bank errors in crediting subsidy
                        payments to its bank account.

                        Cash Disbursements
Disbursements not
properly supported
                        The Authority did not adequately support cash
                        disbursements. The Authority paid invoices that did not
                        support receipt of a service or goods and made payments
                        that were supported with photo copies of invoices. Our
                        review of payments showed that the Authority paid invoices
                        for motor vehicle gas and repairs although the invoice did
                        not identify that the vehicles were Authority vehicles or that
                        the vehicles needed repair. The Authority also paid travel
                        costs without supporting invoices to verify the costs. In


                                Page 13                                   96-PH-202-1018
Finding 1



                            addition, the Authority reimbursed an employee for
                            expenditures based on a copy of a personal check paid to
                            another employee.

                            The Authority did not properly account for voided checks.
 Voided checks not
                            Voided checks were not recorded and checks voided after
 properly controlled
                            they were written were included in the Authority books as
                            issued. The Authority removed the unissued checks at the
                            end of the month through a journal entry.


                            Petty Cash
 Shortages in both petty
 cash funds
                            Two petty cash funds were short by a total of $552. The
                            Authority's general ledger showed a $950 petty cash
                            imprest fund. These funds were divided among two
                            custodians, the Acting Executive Director ($450) and the
                            Acting Maintenance Superintendent ($500). According to
                            the Acting Executive Director, she only received $200
                            when she took custody of the funds and she was not aware
                            the fund should have been $450. She indicated the
                            difference might have been an accounting error and it will
                            be researched.

                            The Acting Maintenance Superintendent could not account
                            for $302 of his $500 petty cash fund. He indicated that he
                            had issued $150 to an employee, however, he did not
                            provide a receipt. The petty cash custodians did not issue
                            receipts for all petty cash funds issued.

 Bank reconciliations not
                            Bank Reconciliations
 properly performed
                            Although the Authority performed bank reconciliations, the
                            reconciliations did not show the correct general ledger or
                            bank balances. The reconciliations did not reconcile the
                            bank accounts to the general ledger cash balance or
                            corrected cash balance. In addition, the Authority used
                            cash receipts that appeared on the bank statements to
                            determinate its general ledger balances. This method would
                            not identify errors in either bank or general ledger balances.
                            The Authority employee responsible for reconciliations
                            stated she was performing reconciliations the same way



96-PH-202-1018                      Page 14
                                                                            Finding 1



                          they were done in the past. A review of two bank
                          reconciliations showed the balances to vary slightly.


                          The Authority did not have an accountant on its staff and
                          had no written operating procedures for cash management.
                          Its accounting department has been without an accountant
                          for more than one year. The accounting function is being
                          performed by the assistant accountant and a fee accountant.
                          The Authority's accounting department has three positions
                          and two are currently vacant.

                          No written operating procedures exist for the Authority's
                          accounting department. The assistant accountant relies on
                          instructions that were verbally passed down to her to
                          perform her duties.

                          The Authority accounting department is understaffed and
                          has no written procedures to guide the staff in performing
                          their duties. The Authority is not able to provide the needed
                          internal controls over its cash transactions. As a result,
                          Authority cash assets were not adequately safeguarded and
                          there was no assurance information used in reporting and
                          making management decisions were accurate.

                          e. Travel
Travel costs were not
properly supported
                          Necessity and reasonableness of claimed travel costs were
                          not always documented. This occurred because the
                          Authority did not have travel policies and procedures
                          governing travel by its staff and Board members. As a
                          result, the Authority paid $15,791 in unsupported travel
                          costs and possible excessive travel expense
                          reimbursements.

                          The Authority did not adequately document travel costs or
                          determine whether travel costs claimed by employees and
                          Board members were within established per diem rates. In
                          addition, the Authority did not establish what constituted
                          eligible travel costs and conditions.

                          The Authority paid unsupported credit card bills totalling
Credit card charges not
                          $15,791 from January 1993 through August 1994. The
supported by invoices
                          credit card bills were not supported with invoices verifying


                                  Page 15                                  96-PH-202-1018
Finding 1



     the charges. The charges included hotel and restaurant costs for employees and Board
     members. In addition, Authority credit cards were used to charge meals which the travelers
     did not include on their travel vouchers. Authority personnel indicated the per diem rates
     were $25 for employees and $50 for Board members.

                                    Also, Board members used the credit cards to charge meals
                                    at local restaurants. The Authority did not obtain
                                    documentation supporting the eligibility of the meal costs.
                                    Examples of undetermined and unsupported travel costs are
                                    as follows:

                                    •   reimbursement for an employee taking a HUD
                                        employee to lunch; and

                                    •   four night stay at the Omni Royal Orleans hotel in New
                                        Orleans at a cost of $1,437.37. The bill was charged on
                                        the Authority credit card that was given to the former
                                        Executive Director. The bill did not state what charges
                                        were included and no invoice was provided by the
                                        traveler.

                                    The Authority addressed travel policies and procedures as
 Authority travel policy
                                    part of its personnel policy. However, the policy did not:
 incomplete
     •                              include per diem rates;

                                    •   establish what constituted eligible travel;

                                    •   establish eligible and reimbursable travel costs, and

                                    •   establish the need to document travel costs.

                                    As a result, the Authority paid $15,791 of unsupported
                                    credit card bills and reimbursed employees for costs without
                                    determining their eligibility.

                                    3. Employee qualifications were not properly checked.
 Staff qualifications were
 not reviewed before
                                    The Authority did not ensure that employees met minimum
 employment
                                    qualifications for positions before they were hired. A
                                    review of personnel files for eight maintenance employees
                                    showed that seven of them did not meet the minimum
                                    qualifications for their position. Authority personnel did
                                    not verify application information or determine whether


96-PH-202-1018                               Page 16
                                                                            Finding 1



                          application information met the job requirements.
                          According to Authority personnel, they did not verify
                          applicant information because they were not always
                          informed of new hires.

                          4. Deficiencies cited in HUD management reviews were
Previous review
                             not corrected.
identified deficiencies
which are not corrected
                          HUD's March 1993 management review cited 11
                          deficiencies. At the time of our audit, the Authority has not
                          corrected the cited deficiencies. Authority personnel cited
                          lack of staff and inaction by HUD as reasons for not
                          correcting the deficiencies.

                          The Authority's vacant managerial positions and the results
                          of HUD's managerial review are over 1 year old, yet the
                          Authority has not taken concrete action to correct the
                          problems. Although the Authority cited difficulties in
                          hiring because of civil service guidelines and HUD inaction
                          regarding their policies, the Authority had the tools to
                          correct the cited problems.

                          As a result, there are no controls over the Authority
                          accounting, managerial, and maintenance functions. The
                          Authority guidelines to accomplish program objectives,
                          and evaluate program and staff achievements are not
                          adequate. Also, HUD requirements for approved policies
                          are not met.

                          Section 201 of the Annual Contributions Contract states the
Criteria
                          Authority shall at all times operate in such manner as to
                          promote serviceability, efficiency, economy, and stability.

                          Although HUD has cancelled Handbook 7465.1 REV-2, the
                          Handbook still contains valuable guidance to assist the
                          Authority in complying with various laws, regulations, and
                          other requirements regarding admissions and occupancy.
                          Chapter 1 of the Handbook contains information required
                          for an admission policy and Chapter 2 addresses
                          applications. Paragraph 2-1.a.(4) states all applications
                          must be processed to the extent necessary to determine
                          whether the applicant is eligible. Further, paragraph 2-
                          1.b.(4) states, in conjunction with taking applications, the



                                  Page 17                                  96-PH-202-1018
Finding 1



                   PHA should request whatever documentation it will need to
                   verify the information the applicant has provided.

                   24 CFR 960.209 (a) requires PHAs to reexamine income
                   and family composition of all tenants at least once every 12
                   months. Further, the PHA must make appropriate
                   adjustments in the Total Tenant Payment and Tenant Rent
                   in accordance with 24 CFR part 913.

                   Procurement practices must meet Federal purchasing and
                   contracting standards (24 CFR 85.36) and HUD
                   requirements (Handbook 7460.8 REV-1).

                   Section 307 of the Annual Contributions Contract requires
                   PHA's to adopt and comply with a statement of personnel
                   policies comparable with pertinent local public practice.
                   Paragraph (C) requires the Authority to maintain complete
                   records with respect to, among other things, authorization
                   of official travel by employees and vouchers supporting
                   reimbursement of travel expense.



Auditee Comments   Generally, the Authority agreed with the finding. Further,
                   the Authority reported it had corrected some of the cited
                   deficiencies and was in the process of correcting the others.

                   The Authority indicated it had corrected its personnel
                   problems by hiring an Executive Director, Maintenance
                   Superintendent, three Assistant Project Managers, and other
                   key staffing positions. It indicated the Accounting position
                   was not filled, however, a Fee Accountant is being used to
                   satisfy this staffing need.

                   Operating policies have been developed and submitted to
                   HUD. The Authority is currently waiting for HUD's
                   response.

                   The Authority contracted with an agency to update job
                   descriptions for all employees. According to the Authority,
                   when the updates are completed, procedures will be written
                   and implemented.

                   Further, the Authority stated that along with the hiring of
                   the Executive Director, systems are being developed to


96-PH-202-1018             Page 18
                                                                      Finding 1



                    evaluate program achievements and staff performance.
                    Also, the Authority said it will develop written procedures
                    regarding evaluation of prospective employees.

                    The Authority indicated it was currently ensuring that prices
                    are reasonable and proper methods are used when
                    purchasing goods and services. It also stated although it
                    does not maintain a list of pre-qualified contractors it does
                    maintain a list of contractors by trade.

                    The Authority indicated it has purchased a new cash
                    register which provides numbered receipts, it now provides
                    receipts to all tenants when payments are received, and is in
                    the process of developing procedures for its accounting
                    operations.

                    Further, the Authority states: (1) a Fee Accountant is
                    currently used to perform its accounting functions and the
                    Executive Director is reviewing the need for a systems
                    person; (2) training information has been provided to its
                    staff for them to select courses and seminars that would be
                    helpful in performing their duties; and (3) new petty cash
                    procedures have been developed and funds are reconciled
                    with the general ledger balances.

                    The Authority indicated it was in the process of developing
                    a travel policy that would incorporate items cited in the
                    finding. It also indicated travel payments are currently
                    being reviewed.


OIG Evaluation of   OIG recognizes the Authority has been trying to correct the
Auditee Comments    cited deficiencies. Based on our evaluation of the
                    Authority's response and review of relevant documents, we
                    believe the Authority has satisfied the recommendation in
                    the draft finding to fill vacant managerial positions.
                    Therefore, we have removed this recommendation from the
                    finding.

                    Also, the Authority provided sufficient information to show
                    it has satisfactorily satisfied its accounting vacancy needs
                    and the petty cash deficiencies. As a result, we have
                    removed the draft recommendations related to these matters
                    from the finding.


                            Page 19                                  96-PH-202-1018
Finding 1



                  The Authority is making an effort in addressing the
                  remaining cited deficiencies. However, efforts to correct
                  these matters were not complete at the time of our review.

Recommendations   We recommend you direct the Authority to;

                  1A.    Develop and implement operating policies and
                         procedures which adequately cover the following
                         areas:

                         •      Tenant Accounts Receivable

                         •      Admissions and Occupancy

                         •      Internal Controls Over Cash

                         •      Travel

                  1B.    Implement its procurement policy and procedures to
                         ensure the following:

                         •      Cost estimates are provided to ensure prices are
                                reasonable and the proper procurement methods
                                are used for purchases of goods and services.

                         •      Qualified inspectors are used to inspect
                                contractors work to ensure all contracts
                                requirement are completed properly.

                         •      Adequate work specifications are provided to
                                allow reasonable job costing and evaluation of
                                required work.

                         •      An adequate list of pre-qualified contractors and
                                suppliers are maintained and used to ensure
                                competitive prices are used for purchases.

                  1C.    Develop and implement procedures to adequately
                  evaluate prospective employees.

                  1D.    Correct all deficiencies noted in prior management
                         reviews.




96-PH-202-1018               Page 20
                                               Finding 1



1E.   Provide documentation evidencing the eligibility of
      the $15,791 in unsupported travel cost and repay
any amounts that can not be supported.




        Page 21                               96-PH-202-1018
Finding 2




The Authority Did Not Maintain Its Projects In
        Good Repair and Condition

The Authority's maintenance operations did not provide projects that are in good repair and
condition. Specifically, maintenance operations were found to be deficient in the areas of: (a)
vacancies; (b) work orders; (c) operating procedures; (d) preventive maintenance; (e) annual
Housing Quality Standards (HQS) inspections; (f) controls over materials and supplies inventory;
and (g) evaluating staff performance. This occurred because maintenance operations were not
managed in an efficient, effective, or economical manner. As a result, residents were not
provided decent, safe, and sanitary housing as required and applicants spent an excessive amount
of time waiting for units.



                                    Vacancies
 The Authority needs to
 turn around vacant units
                                    At the time of our review, the Authority had 64 vacant
 quicker
                                    units. The Authority did not rehabilitate 54 (84 percent) of
                                    the 64 vacant units within the 30 day period suggested by
                                    HUD.

                                    Vacancies included the following:
                                                                                Number
                                                        Days Vacant             of Units
                                                        1 to 30 days                8
                                                       31 to 180 days               25
                                                       181 to 365 days              20
                                                       over 365 days                11
                                                            Total                   64

                                    The Authority did not consider vacant units a priority and
                                    allowed its vacancies to increase from 33 in 1993 to its
                                    current level. The maintenance department did not have
                                    planned schedules for rehabilitating vacant units.

                                    All vacant units are contracted out for repairs. The
                                    Authority did not determine whether its maintenance staff



96-PH-202-1018                               Page 22
                                                                           Finding 2



                        could perform the required repairs faster and more
                        economically.

                        The Authority's Oak Street Project accounted for 46
                        vacancies. According to Authority staff, repairing vacant
                        units at the Oak Street Project was not a priority because the
                        Authority was not able to rent those units.

                        Work Orders
Work order system has
problems
                        The Authority's work order system was not effective in
                        ensuring reported repairs were completed timely. Authority
                        supervisory staff said the standards for completing work
                        orders were as follows: emergency work orders within 24
                        hours; urgent work orders within 48 hours; and routine
                        work orders within 7 days. The Authority's report of work
                        orders dated November 21, 1994, listed 181 outstanding
                        work orders. These work orders are categorized as follows:
                                             Period                 Number of
                                           Outstanding             Work Orders
                                           up to 1 week                  56
                                           2 to 4 weeks                  50
                                          5 to 12 weeks                  29
                                          13 to 26 weeks                 27
                                          27 to 48 weeks                 19
                                              Total                     181

                        Based on the Authority's standards, it should have
                        completed at least 125 of the above work orders.

                        Work orders outstanding in excess of one week included
                        emergency and urgent work items. Examples include:
                        bedroom ceiling fell in; leaking bedroom ceiling; clogged
                        sewer line; and smoke detectors not operating. In addition,
                        the Authority work order inventory was cluttered with
                        miscellaneous items such as: recording truck milage;
                        answering office telephones; and routine cleaning.




                                Page 23                                   96-PH-202-1018
Finding 2



                            Some work orders were not completed because materials
                            were not in inventory. Needed materials included locks,
                            cabinets, screen door handles, faucets, cement and
                            plywood. These items were within the spending limits of
                            the department's petty cash fund.

                            The Acting Maintenance Superintendent said he distributed
                            work orders to his staff, but they did not complete them and
                            he never followed up.

                            Operating Procedures
 Maintenance operation
 needs written procedures
                            The Authority maintenance department did not have written
                            operating procedures for maintaining projects in good repair
                            and condition. Maintenance staff were guided by oral
                            instructions passed down by prior maintenance supervisors.
                            The Acting Maintenance Superintendent provided us a
                            document showing some guidelines for
                            work orders. However, this document did not provide
                            procedures for all categories of work orders, vacant unit
                            repairs, tenant damages, materials usage, and other
                            operating requirements.

                            Authority personnel said they are restructuring the
                            department and are writing operating procedures and
                            performance standards.

                            Preventive Maintenance
 Authority needs a
 preventive maintenance
                            The Authority did not have a preventive maintenance
 plan
                            program. Although he did not provide documentation to
                            show the inspections were done, the Acting Maintenance
                            Superintendent provided a schedule showing dates
                            preventive maintenance inspections were scheduled. The
                            poor physical condition of the projects illustrates the lack of
                            preventive maintenance.

                            Housing Quality Standards (HQS) Inspections
 Required inspections
 were not performed
                            The Authority did not perform annual HQS inspections as
                            required. Although the Authority provided a report
                            showing that annual HQS inspections were performed, the
                            report was not accurate. A review of ten inspection files
                            showed that inspection reports were not included in seven


96-PH-202-1018                      Page 24
                                                                           Finding 2



                          of the files and none stated whether the unit met HQS. In
                          addition, OIG inspection of the Authority's Oak Street
                          Project (192 units) found it did not meet HQS.

                          The maintenance staff said they did not do inspections to
                          determine whether units met HQS. According to the staff,
                          they did inspections because they were told to do them.
                          The Acting Maintenance Superintendent did not know why
                          the files did not have inspection reports when his report
                          showed the inspections were completed.

                          Materials and Supplies Inventory
Controls over inventory
are weak
                          The Authority did not know the quantity or value of its
                          inventory of materials and supplies. According to
                          Authority staff, they had just done a physical count of the
                          inventory but had not completed the process and could not
                          provide the quantity or value. The general ledger showed
                          a negative balance in its materials inventory account
                          ($14,213). The Acting Maintenance Superintendent said a
                          new inventory system was being implemented to accurately
                          track the Authority's inventory and supplies.

                          Staff Evaluations
Maintenance personnel
not properly evaluated
                          Maintenance supervisory staff did not adequately supervise
                          or evaluate staff performance. The Acting Maintenance
                          Superintendent said he relied on his supervisors to monitor
                          staff performance. However, staff did not complete work
                          orders and the supervisors, including himself, were not
                          ensuring that staff were performing.          The Acting
                          Maintenance Superintendent did not do annual staff
                          performance evaluations.

                          The Acting Maintenance Superintendent provided
                          documentation showing he made management and the
                          Authority Board aware of the maintenance operation
                          problems. Since 1993, various memorandums and letters to
                          the Acting Executive Director and the Board outlined the
                          problems. However, management did not take corrective
                          actions. The maintenance operations are unorganized, lack
                          adequate supervision, and provide no accountability of
                          staff, materials, and supplies. In addition, the maintenance



                                  Page 25                                 96-PH-202-1018
Finding 2



                    department has not had a permanent Maintenance
                    Superintendent in two years.

                    Section 209 of the Annual Contributions Contract states the
 Criteria
                    Authority shall at all times maintain each project in good
                    repair, order, and condition. Section 201 of the Contract
                    specifies that the Authority must operate the projects:

                    "...(1) solely for the purpose of providing decent, safe, and
                    sanitary dwellings...(2) in such manner as to promote
                    serviceability, efficiency, economy, and stability, and (3) in
                    such manner as to achieve the economic and social well-
                    being of the tenants thereof."

                    Paragraph 6-2E. of HUD Handbook 7460.5, Public
                    Housing Management Assessment Program (PHMAP),
                    indicates that an Authority can achieve an acceptable level
                    of performance by completing vacant unit turnaround on an
                    average of greater than 25 calendar days and less than or
                    equal to 30 calendar days.

                    In summary, the Authority has not established an effective
                    and economical maintenance operation necessary to provide
                    decent, safe, and sanitary housing for its tenants as required.



Auditee Comments    The Authority indicated it was in the process of developing
                    and implementing maintenance procedures that would
                    include the areas cited in the recommendations. The
                    Authority indicated a Maintenance Superintendent was
                    hired.


OIG Evaluation of   Based on the Authority's response and our review of
Auditee Comments    relevant documents, the Authority has satisfied the
                    recommendation requiring them to hire a Maintenance
                    Superintendent. We removed this draft recommendation
                    from the finding.




96-PH-202-1018              Page 26
                                                                       Finding 2




Recommendation   We recommend you require the Authority to:

                 2A.   Develop and implement maintenance operation
                       systems and procedures that address the matters
                       noted in this report. The procedures should include,
                       but not be limited to:

                       •             rehabilitating vacant units in a timely
                                     manner;

                       •             ensuring work orders are completed timely;

                       •             implementing a preventive maintenance
                                     plan;

                       •             inspecting units annually to ensure the units
                                     meet Housing Quality Standards;

                       •             maintaining an accurate inventory of
                                     materials and supplies and properly
                                     accounting for usage; and

                       •             ensuring proper supervision and evaluation
                                     of staff.




                           Page 27                                    96-PH-202-1018
Internal Controls
In planning and performing our audit, we considered internal control systems of the management
of the Housing Authority of Chester County to determine our auditing procedures and not to
provide assurance on internal control. Internal control is the process by which an entity obtains
reasonable assurance as to achievement of specific objectives. Internal control consists 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.



                                     We determined that the following internal control
 Control Categories
                                     categories were relevant to our audit objectives:

                                     (1)   Cash Management
                                     (2)   Maintenance
                                     (3)   Housing Quality Standards
                                     (4)   General Procurement
                                     (5)   Travel
                                     (6)   Admissions and Occupancy
                                     (7)   Tenants Accounts Receivables
                                     (8)   General Administration

                                     We evaluated all of the control categories identified above
 Scope of Work
                                     by determining the risk exposure and assessing control
                                     design and implementation.

                                     A significant weakness exists if internal control does not
 Significant Weaknesses
                                     give reasonable assurance that the entity's goals and
                                     objectives are met; that resource use is consistent with laws,
                                     regulations, and policies; that resources are safeguarded
                                     against waste, loss and misuse; and that reliable data are
                                     obtained, maintained, and fairly disclosed in reports. Based
                                     on our review, we believe the following items are
                                     significant weaknesses:

                                     (1)   Cash Management (Finding 1)
                                     (2)   Maintenance (Finding 2)
                                     (3)   Housing Quality Standards (Finding 2)
                                     (4)   General Procurement (Finding 1)
                                     (5)   Travel (Finding 1)
                                     (6)   Admissions and Occupancy (Finding 1)
                                     (7)   Tenants Accounts Receivable (Finding 1)
                                     (8)   General Administration (Finding 1)


96-PH-202-1018                                Page 28
          Internal Controls




Page 29        96-PH-202-1018
Internal Controls




96-PH-202-1018      Page 30
Follow Up On Prior Audits
This is the first OIG audit of the Housing Authority of the County of Chester's public housing
activities.

The most recent Independent Accountant report, for the year ended December 31, 1994,
contained four outstanding findings. Two findings related to inventory matters and another
related to late recertifications of tenants. The remaining finding was not applicable to our audit.




                                              Page 31                                  96-PH-202-1018
Follow Up On Prior Audits




96-PH-202-1018              Page 32
                             Appendix A

Auditee Comments




                   Page 33   96-PH-202-1018
Appendix A




96-PH-202-1018   Page 34
          Appendix A




Page 35   96-PH-202-1018
Appendix A




96-PH-202-1018   Page 36
          Appendix A




Page 37   96-PH-202-1018
Appendix A




96-PH-202-1018   Page 38
                                                                                 Appendix B

Schedule of Unsupported Costs

              Recommendation
                Number             Unsupported 1/

                                                                                            1E
                              $15,791

                                                                                         Total
                            $15,791




1/ Unsupported amounts are not clearly eligible or ineligible but warrant being contested
 because of a lack of documentation supporting the need to incur such costs.




                                            Page 37                               96-PH-202-1018
Appendix B




96-PH-202-1018   Page 38
                                                                    Appendix C

Distribution
Secretary's Representative, Mid-Atlantic, 3AS
Director, Internal Control and Audit Resolution, 3AFI
Director, Office of Public Housing, 3APH
Director, Field Accounting Division, 3AFF
Assistant Secretary for Field Management, SDF (Room 7106)
Eleanor Clark, Comptroller/Audit Liaison Officer (Room 5132) (3)
Acquisitions Librarian, Library, AS (Room 8141)
Chief Financial Officer, F (Room 10164) (2)
Deputy Chief Financial Officer for Operations, F (Room 10166) (2)
Assistant Director in Charge, US GAO, 820 1st St., NE Union
 Plaza, Bldg 2, Suite 150, Washington, DC 20002
 Attn: Mr. Cliff Fowler (2)
Auditee




                                          Page 39                   96-PH-202-1018