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
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)