Issue Date
May 6, 1998
Audit Case Number
98-CH-202-1003
TO: Thomas S. Marshall, Director, Public Housing Hub, Cleveland Area Office
Forrest D. Jones, Director, Public Housing Program Center, Indiana State Office
FROM: Dale L. Chouteau, District Inspector General for Audit, Midwest
SUBJECT: Housing Authority of the Town of Bloomfield
Safeguarding Monetary Assets and Inventory
Bloomfield, Indiana
We completed an audit of the Housing Authority of the Town of Bloomfield at the request of HUD’s
Indiana State Office. The objectives of our audit were to: (1) determine whether the Housing
Authority had adequate management controls for safeguarding cash and other monetary assets and
inventory; (2) review for indicators of possible waste, loss and misuse of cash or other monetary assets
and inventory; and (3) establish, if appropriate, the amount of any misappropriation, the cause, and the
individuals involved.
We concluded that the Housing Authority’s management controls were weak, and offered an
opportunity for its employees to misuse or divert Authority funds; however, we did not find that
employees diverted funds. We found that the Authority did not effectively manage its rental units;
had inadequate cash management controls; did not disclose conflicts of interest; and had not established
a cost allocation plan.
Within 60 days, please provide us, for each recommendation made in this report, a status report on: (1)
the corrective action taken; (2) the proposed corrective action and the date to be completed; or (3)
why action is considered unnecessary. Also, please furnish us copies of any correspondence or
directives issued because of the audit.
Should you or your staff have any questions, please contact me at (312)353-7832.
Management Memorandum
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98-CH-202-1003 Page ii
Executive Summary
We completed an audit of the Housing Authority of the Town of Bloomfield at the request of HUD’s
Indiana State Office. Our audit objectives were to: (1) determine whether the Housing Authority had
adequate management controls for safeguarding cash and other monetary assets and inventory; (2)
review for indicators of possible waste, loss and misuse of cash or other monetary assets and inventory;
and (3) establish, if appropriate, the amount of any misappropriation, the cause, and the individuals
involved.
We concluded that the Housing Authority’s management controls were weak, and offered opportunity
for its employees to misuse or divert Authority funds; however, we did not find that employees
diverted funds.
The Housing Authority did not follow HUD’s requirements
The Authority’s regarding the rental of commercial and residential units. The
Management Controls Authority did not: (1) seek HUD’s approval for the conversion
Were Weak and of the dwelling units to commercial units; (2) execute leases
Requirements Were Not with its commercial tenants and its Resident Custodian; (3)
Followed charge rent for two commercial units, and paid for the
commercial tenants’ use of utilities; and (4) amend its Low-
Income Housing lease forms to include the provisions of the
Housing Opportunity Program Extension Act of 1996. The
Authority also inappropriately used $4,352 in Comprehensive
Improvement Assistance Program funds to remodel and furnish
a unit as a beauty shop. As a result, the Authority did not:
maximize its income, adequately protect the rights of its
tenants, and effectively use resources.
The Housing Authority did not maintain an effective system of
controls over cash management. The Authority did not: (1)
adequately segregate the duties of its employees; (2) safeguard
cash funds; (3) follow its Internal Monitoring Policy or HUD’s
requirements regarding cash; and (4) properly maintain records
for a checking account. The weaknesses existed because the
Authority’s Board of Commissioners and its top management
did not exercise their responsibilities to implement effective
cash management controls. Their failure to do so increased the
risk of loss or misuse of funds.
The Housing Authority did not follow its Procurement Policy,
HUD’s requirements, and the State of Indiana’s Code
regarding conflicts of interest. The Authority did not: (1)
disclose conflicts of interest to the public via board meeting
minutes; (2) obtain a waiver from HUD for conflicts of interest;
Page iii 98-CH-202-1003
Executive Summary
and (3) require its contractors to insert a provision prohibiting
conflicts of interest in each subcontract. The Executive
Director was not aware of HUD’s or the State of Indiana’s
requirements regarding conflicts of interest and did not
understand the importance of the Authority’s conflict of
interest requirements. Rules that require the avoidance and
reporting of conflicts of interest are necessary to eliminate
situations that could easily result in the misuse of funds, impede
free and open competition, and reduce public confidence in the
Authority.
The Housing Authority did not have a plan to allocate indirect
costs among its programs. The Authority allocated all
employees’ salary costs and non-salary costs, with the
exception of phone costs, to the Low-Income Housing
Program. Twenty dollars of phone costs per month were
arbitrarily charged to the Section 8 Program. The Low-
Income Housing Program was not reimbursed by the other
programs. While the Housing Authority was cited by HUD
during its July 1997 review for failing to establish a cost
allocation plan, the Authority had not established a plan since
they were concentrating on correcting other issues cited in
HUD’s review. As a result, the Authority’s Low-Income
Housing Program was overcharged, and HUD lacks proper
visibility over the cost of its programs.
We recommend that the Public Housing Hub Director in
Recommendations Cleveland assures that the Housing Authority of the Town of
Bloomfield implements controls to correct the weaknesses
cited in this report.
We presented our draft findings to the Authority's Executive
Director and HUD's staff during the audit. We held an exit
conference with the Authority's Board Chairman and Executive
Director on April 13, 1998. The Authority provided written
comments to our findings. The complete text of the comments
are included in Appendix B with the exception of two exhibits
that were not necessary for understanding the Authority’s
comments. A complete copy of the Authority’s responses with
exhibits was provided to HUD’s Office of Public Housing.
98-CH-202-1003 Page iv
Table of Contents
Management Memorandum i
Executive Summary iii
Introduction 1
Findings
1 The Housing Authority Did Not Effectively
Manage Its Units 3
2 The Authority Lacked Adequate Cash
Management Controls 11
3 Conflicts Of Interest Were Not Disclosed 19
4 The Authority Lacked A Cost Allocation Plan 25
Follow Up On Prior Audits 29
Appendices
A Schedule of Questioned Costs 31
B Audit Comments 33
C Distribution 47
Page v 98-CH-202-1003
Table of Contents
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98-CH-202-1003 Page vi
Introduction
The Housing Authority of the Town of Bloomfield was established on April 5, 1966 under the
laws of the State of Indiana. The Housing Authority contracts with HUD to provide housing to
low income individuals. A five member Board of Commissioners governs the Authority. The
Chairman of the Board is James Miller. The Executive Director is responsible for the Authority’s
day to day operations. The Authority’s Executive Director is Lavon Yoho. The Authority has
been on HUD’s troubled housing list since 1995. The official records for the Authority are at 100
West Main Street, Bloomfield, Indiana.
The Housing Authority operates three programs: (1) a Low-Income Housing Program consisting
of 92 units; (2) a Section 8 Voucher Program consisting of 50 vouchers; and (3) a Comprehensive
Improvement Assistance Program.
The audit objectives were to: (1) determine whether the
Audit Objectives Housing Authority had adequate management controls for
safeguarding cash and other monetary assets and inventory; (2)
review for indicators of possible waste, loss and misuse of cash
or other monetary assets and inventory; and (3) establish, if
appropriate, the amount of any misappropriation, the cause,
and the individuals involved.
The Housing Authority is responsible for establishing a
Management Controls system of management controls. Management controls
include: the plan of organization, methods, and procedures
adopted by management to ensure that its goals are met;
processes for planning, organizing, directing, and
controlling program operations; and systems for measuring,
reporting, and monitoring program performance.
We determined that the following management controls
were relevant to our audit objectives:
. Program Operations - Policies and procedures that
management has implemented to reasonably ensure that
a program meets its objectives.
. Validity and Reliability of Data - Policies and
procedures that management has implemented to
reasonably ensure that valid and reliable data are
obtained, maintained, and fairly disclosed in reports.
. Compliance with Laws and Regulations - Policies and
procedures that management has implemented to
Page 1 98-CH-202-1003
Introduction
reasonably ensure that resource use is consistent with
laws and regulations.
. Safeguarding Resources - Policies and procedures that
management has implemented to reasonably ensure that
resources are safeguarded against waste, loss, and
misuse.
We performed our on-site audit work at the Housing
Audit Scope And Authority between July and September 1997 and January
Methodology and March 1998. To assess the Housing Authority’s
relevant management controls and obtain information
relating to the Authority’s operations, we interviewed
HUD’s and the Housing Authority’s staff. We analyzed the
Low-Rent, Comprehensive Improvement Assistance, and
Section 8 Programs’ general ledgers, cash receipts, and cash
disbursements ledgers to verify the accuracy of receipts and
disbursements. We reviewed bank statements and canceled
checks to assure that all sources of cash were properly
accounted for. We reviewed Board meeting minutes to
evaluate the Authority’s policies. We performed a cash
count and confirmed the Authority’s bank balances to
evaluate cash controls. Additionally, to confirm the
accuracy of accounts receivable balances, we sent
confirmations to six current and vacated tenants.
The audit covered the period January 1, 1996 through June
30, 1997. This period was extended as necessary. We
conducted the audit in accordance with generally accepted
government auditing standards.
We provided a copy of this report to the Housing
Authority's Executive Director and the Chairman of the
Board.
98-CH-202-1003 Page 2
Finding 1
The Housing Authority Did Not Effectively
Manage Its Units
The Housing Authority of the Town of Bloomfield did not follow HUD's requirements regarding the
lease of commercial and residential units. The Housing Authority did not: (1) seek HUD's approval for
the conversion of dwelling units to commercial units; (2) execute leases with its commercial tenants
and its Resident Custodian; (3) charge rent for two commercial units, and paid for the commercial
tenants' use of utilities; and (4) amend its Low-Income Housing lease forms to include the provisions of
the Housing Opportunity Program Extension Act of 1996. The Housing Authority also
inappropriately used $4,352 in Comprehensive Improvement Assistance Program funds to remodel and
furnish a unit as a beauty shop. As a result, the Housing Authority did not maximize its income,
adequately protect the rights of its tenants, and effectively use resources.
The Annual Contributions Contract, Section 4, says in part that
HUD’s Requirements
the Housing Authority should operate each project
economically and efficiently.
HUD Handbook 7486.1, The Public Housing Demolition,
Disposition and Conversion Handbook, page 8-1, states that
vacant units approved by HUD for conversion shall be
deprogrammed as soon as possible, but no later than two
months after the Authority's receipt of HUD's approval. Page
7-3 states that written approval by HUD is required before the
Authority can undertake any actions involving the conversion
of units.
HUD Handbook 7510.1, Low-Rent Housing Accounting
Handbook, Chapter 3, Section 12, states that rent, including
charges for utilities and equipment, will be charged to lessees of
dwelling units rented for non-dwelling purposes.
PIH Notice 96-27 issued on May 15, 1996, page 1, states that
housing authorities should implement the provisions of the
Housing Opportunity Program Extension Act of 1996 without
awaiting HUD regulations. Page 5 of the Notice says public
housing lease forms must be amended promptly to establish
that drug-related criminal activity on or off a housing
authority's premises and alcohol abuse that interferes with the
health, safety, or right to peaceful enjoyment of the premises by
other residents are grounds for termination of tenancy.
Page 3 98-CH-202-1003
Finding 1
The responsibilities of a housing authority’s Executive Director
Executive Directors’ include collecting rent, enforcing lease terms, and maintaining
Responsibilities overall compliance with Federal, State, and local laws, as well
as the authority's policies and procedures.
The Housing Authority did not seek HUD's approval for the
The Authority Did Not conversion of dwelling units to commercial units.
Seek HUD’s Approval To Consequently, the Housing Authority inappropriately received
Convert Units $1,199 in subsidy for its commercial units. The Housing
Authority allowed the Bloomington Hospital and a beauty shop
to occupy two units starting in December 1996 and April 1997,
respectively, but did not advise HUD to deprogram the units in
order to stop the subsidy payments. The Hospital used its unit
as a hospice.
The Executive Director said he was not aware of HUD's
requirements regarding the deprogramming of units until
September 1997 when he received the results of HUD's July
1997 review. The Authority requested HUD's approval to
deprogram the units in January 1998, and HUD approved the
units to be taken off line in March 1998. HUD was in the
process of calculating the excess subsidy for the commercial
units. The Executive Director could not provide an adequate
explanation of why it took five months to request the
deprogramming. We believe the Executive Director should
have been aware of the requirement to obtain HUD’s approval
before it deprogrammed units and of the fact that subsidy
payments stop for units no longer than two months after
HUD’s approval to deprogram is received. Since the Authority
did not request HUD’s approval before it deprogrammed the
units, we believe the Authority was not entitled to receive
subsidy payments for more than two months after it unilaterally
deprogrammed the units. Therefore subsidy payments should
have stopped in February and June 1997.
The Housing Authority did not promptly execute a lease with
No Leases Were Executed
two commercial tenants and the Resident Custodian. The
Executive Director allowed the Bloomington Hospital to
occupy a unit for one year without a lease. A lease was
executed with the Hospital effective January 1, 1998. The
Director also allowed a beauty shop to occupy a unit without a
lease from April 1997 to at least February 27, 1998. Further,
the Director did not execute a lease with the Authority's
Resident Custodian who was required to live on the premises.
98-CH-202-1003 Page 4
Finding 1
The Resident Custodian moved into a Low-Income Housing
unit in September 1991, and received a reduced rent rate of
$100 per month in exchange for special duties he was to
perform, such as responding to emergency maintenance
requests after normal business hours. The Executive Director
said he was not aware of HUD's requirement for a lease with
the Resident Custodian. He also said initially the Hospital was
to move after approximately two months, so he felt a lease was
not necessary. The Executive Director said it was an oversight
that a lease was not executed with the beauty shop. Leases
protect HUD's and the Housing Authority's interests by
providing a legal basis to take appropriate action if the terms of
the lease arrangements are not complied with.
The Housing Authority did not charge the Hospital and beauty
The Authority Did Not shop rent and paid for their use of utilities. Effective January 1,
Charge Commercial 1998, the Bloomington Hospital signed a one year lease to rent
Tenants Rent the unit initially occupied in December 1996 and a second unit.
The Hospital's lease required a payment of $500 a month in
rent for both units. The Executive Director waived the
payment of any back rent for the unit occupied in December
1996. As of February 27, 1998, the Authority had not
executed a lease with the beauty shop and no rent had been
collected.
The Executive Director said he should have completed a lease
with the Bloomington Hospital earlier. However, he said the
Board of Commissioners was aware that the Hospital was not
paying rent and did not have a written lease. The January 1998
Board meeting minutes contained a letter from the Hospital
thanking the Authority for a year's free rent. The Executive
Director also said that there was a need for the beauty shop and
that it served elderly tenants at a reasonable price. He said he
needed direction in establishing a rental amount since the shop
was only open one day a week.
We believe the Authority set an inappropriate rent amount for
the lease negotiated with the Bloomington Hospital. The
Executive Director said he determined that the average rent
paid by the Authority's tenants was $186 per month. He said
he believed the $250 per month rent from the Hospital would
cover the average tenants' payment plus the cost of utilities.
However, there was no way to estimate the cost of the
commercial units use of utilities since the units did not have a
separate meter. Additionally, the Authority's maximum rent
Page 5 98-CH-202-1003
Finding 1
amount is $350, and 26 percent of the Authority's tenants pay
more than the $250 a month rent charged to the Hospital. The
Executive Director said he was not aware of the percentage of
tenants that paid more in monthly rent than the Hospital. He
said that if he was aware of this, he would have adjusted the
Hospital's monthly rent. Since the Hospital uses the units as a
hospice that does not benefit low and moderate income tenants,
we believe it should, at a minimum, have been charged $350
per month for each unit.
Based on the Authority's maximum rent of $350 per month, we
determined that the Authority lost $4,200 in rent between
December 1996 and December 1997 from the Bloomington
Hospital. Since a lease had not been executed with the beauty
shop and the Authority said the shop was intended to benefit
low and moderate income tenants, we did not have a basis for
what constituted a fair rent. Therefore, we did not calculate
the past rent that should have been collected from the beauty
shop. Additionally, since the commercial units were not
metered, we could not determine how much the Authority paid
for the commercial units’ utility costs. By not charging
commercial tenants for rent and utilities, the Authority missed
the opportunity to collect income that could have been used for
its Low-Income Housing Program.
The Housing Authority did not amend its Low-Income
Leases Were Not Housing lease forms to include the provisions of the Housing
Amended Opportunity Program Extension Act of 1996. The Act was
signed into law on March 28, 1996 and contained the One
Strike and You're Out policy. The Act provides for
termination of tenancy and prohibited admittance for any
criminal activity or alcohol abuse in Public Housing.
The Executive Director and the Board of Commissioners were
aware of HUD's requirement regarding the amending of the
Low-Income Housing lease forms to include the One Strike
policy. However, the Executive Director said he delayed
amending the lease forms in order to perform priority work
regarding the Comprehensive Improvement Assistance
Program. As a result, the Housing Authority did not ensure
that the tenants' health, safety, and right to peaceful enjoyment
was fully protected.
98-CH-202-1003 Page 6
Finding 1
The Housing Authority inappropriately used $4,352 in
Comprehensive Comprehensive Improvement Assistance Program funds to
Improvement Assistance remodel and furnish a beauty shop. The Authority spent
Program Funds Were Not $1,253 in construction rehabilitation, and $3,099 for furniture
Properly Used and mirrors for the beauty shop. The beauty shop was not
approved by HUD.
HUD Handbook 7485.3 G, Comprehensive Grant Program
Guidebook, page 2-1, says that, with the exception of an
emergency, a housing authority should only expend funds on
activities identified in the Comprehensive Plan that will
reasonably ensure the long-term physical and social viability of
the development at a reasonable cost. Eligible and ineligible
costs of the Comprehensive Grant Program are the same as
under the Comprehensive Improvement Assistance Program.
The Executive Director said HUD was aware of the beauty
shop since HUD reviewed the Comprehensive Plans and
blueprints. He also said the Plans were submitted to HUD by
the architect. However, the beauty shop was not identified in
the Comprehensive Plan. The Construction Analyst for HUD's
Indiana State Office said HUD did not review the blueprints for
eligible activities, but only for compliance with Section 504 of
the Disabilities Act. Further, the Program Analyst for HUD's
Indiana State Office said HUD would have required a needs
assessment of the beauty shop by the Authority prior to
approving the use of any Comprehensive Improvement
Assistance Program funds. As a result, HUD lacks assurance
that the Authority effectively used Comprehensive
Improvement Assistance Program funds.
Excerpts paraphrased from the Authority’s comments on our
Auditee Comments draft finding follow. Appendix B contains the complete text of
the comments.
The Authority agrees with the finding and recommendations
and will ensure HUD’s guidelines and policies are followed.
The Authority will: collect the cost of utilities for all
commercial units; reimburse HUD $1,199 for excess subsidy
received; reimburse HUD $3,600 from non-Federal funds for
the lost rent; negotiate a new lease for $350 per month with the
Bloomington Hospital for the two units they are using; submit
the beauty shop lease to HUD, and upon reply from HUD
Page 7 98-CH-202-1003
Finding 1
reimburse the Low-Income Housing Program for any amount
undercharged since April 1997; and reimburse the
Comprehensive Improvement Assistance Program $4,352 from
non-Federal funds, if a needs assessment does not support the
use of Comprehensive Improvement Assistance Program funds
for the beauty shop.
The Authority has completed a lease with the Resident
Custodian and has proposed Board resolutions that require the
Authority to comply with HUD’s requirements and the
Housing Opportunity Program Extension Act.
The actions the Authority has taken and plans should help to
OIG Evaluation of correct the problems identified in the finding; however, in
Auditee Comments addition to passing Board resolutions, the Authority needs to
develop procedures to follow HUD’s requirements and
implement the Housing Opportunity Program Extension Act.
The Authority did not provide any documentation to show that
a lease has been executed with the Resident Custodian.
Recommendations We recommend that the Director of the Public Housing Hub in
Cleveland assures that the Housing Authority of the Town of
Bloomfield:
1A. Collects the cost of utilities on all commercial units.
1B. Reimburses HUD $1,199 from non-Federal funds for
the excess subsidy received between December 1996
and December 1997.
1C. Executes a lease with the management of the beauty
shop showing the amount of monthly rent and other
terms required by HUD.
1D. Executed a lease with its Resident Custodian that
showed the amount of the monthly rent and the special
duties required to be performed.
1E. Establishes procedures and controls to follow its Public
Housing Occupancy Policy and HUD's requirements
regarding the execution of commercial and residential
leases.
98-CH-202-1003 Page 8
Finding 1
1F. Establishes procedures and controls to follow HUD's
requirements, including but not limited to, obtaining
written approval from HUD prior to undertaking any
actions to convert dwelling units.
1G. Reimburses its Low-Income Housing Program $4,200
from non-Federal funds for the lost rent that occurred
between December 1996 and December 1997 on the
unit occupied by the Bloomington Hospital.
1H. Increases the rent on the Bloomington Hospital’s units
to $350 per unit per month.
1I. Obtains HUD's approval on the rental rate for the
beauty shop.
1J. From non-Federal funds, reimburses its Low-Income
Housing Program for the amount of rent that should
have been collected from the beauty shop between
April 1997 and the date a lease is signed.
1K. Amends its Low-Income Housing lease forms to
comply with the requirements of the Housing
Opportunity Program Extension Act of 1996.
1L. Performs a needs assessment of the beauty shop. If the
assessment does not support the use of Comprehensive
Improvement Assistance Program funds for the beauty
shop's furnishings and rehabilitation, reimburse $4,352
to its Comprehensive Improvement Assistance
Program from non-Federal funds.
Page 9 98-CH-202-1003
Finding 1
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98-CH-202-1003 Page 10
Finding 2
The Authority Lacked Adequate Cash Controls
The Housing Authority of the Town of Bloomfield did not maintain an effective system of controls
over cash management. The Housing Authority did not: (1) adequately segregate the duties of its
employees; (2) safeguard cash funds; (3) follow its Internal Monitoring Policy or HUD's requirements
regarding cash; and (4) properly maintain records for a checking account. The weaknesses existed
because the Authority's Board of Commissioners and its top management did not exercise their
responsibilities to implement effective cash management controls, and their failure to do so increased
the risk of loss or misuse of funds.
Controls over cash management comprise the plan of
Cash Control organization, methods, and procedures adopted by
Requirements management to ensure resources are guarded against waste,
loss, and misuse. The important features of an adequate
control system are:
· Control should be established early in a transaction and
carried through to completion;
· No person should have complete control over all phases of
any significant transaction;
· Work should flow from one employee to another without
ever returning to an employee; and
· Record keeping should be separate from operations of
handling and custody of assets. For example, the
bookkeeping function should be separate from the
collection and issuance of receipts. An employee who
collects and issues receipts for rental payments should not
be responsible for recording payments and adjustments to
tenant accounts.
Public housing authority Commissioners have a responsibility
Board of Commissioners’ to HUD to ensure national housing policies are carried out, and
Responsibilities to the Executive Director and staff to provide sound and
manageable directives. The Commissioners are accountable to
their locality and best serve it by monitoring operations to be
certain that housing programs are carried out in an efficient and
economical manner.
Page 11 98-CH-202-1003
Finding 2
The Housing Authority did not properly segregate employees’
The Authority Did Not duties concerning cash receipts and disbursements. The
Adequately Segregate Authority's former Office Assistant performed various activities
Employees’ Duties without adequate internal checks and balances. Therefore, the
Authority unnecessarily increased its susceptibility to program
abuses. Although the Authority only had four full-time
employees, four employees was an adequate number to
segregate duties so that no one individual had complete control
of a transaction.
The Authority's former Office Assistant collected and issued
receipts for in-person rental payments; posted payments and
adjustments to the tenants' accounts; and prepared bank
deposits. Thus, the former Assistant effectively had complete
control over all phases of the rent collection process and the
record keeping. Although we did not find that the former
Office Assistant took advantage of the opportunity to
divert rent collections, the opportunity existed to do so.
The former Office Assistant also prepared payments to
contractors for the Authority's Comprehensive Improvement
Assistance Program. Once an invoice was received, the former
Assistant prepared a check for the signature of the Chairman of
the Board and the Executive Director. After the check was
signed, it was returned to the former Assistant for payment.
Consequently, the former Office Assistant could have diverted
the payment without detection. We did not find that the
Assistant took advantage of the opportunity to divert the
Authority's assets.
The Housing Authority did not safeguard its cash funds. The
The Authority Did Not
Authority did not maintain a current General Depository
Safeguard Cash Funds
Agreement with its bank, only required one signature to
withdraw funds from the High Rise Social account, and did not
limit access to cash collections and the petty cash fund.
Depository Agreements, requiring at least two signatures to
withdraw cash from the Authority's bank accounts, and limiting
employees access to cash help protect funds against
unauthorized use.
The Authority did not maintain a current General Depository
Agreement with its financial institution. The previous
Agreement expired on December 1, 1996. Section 9(A) of the
Annual Contributions Contract requires the Housing Authority
to have a General Depository Agreement. The Executive
98-CH-202-1003 Page 12
Finding 2
Director said he was not aware that the Agreement had
expired. He said the Housing Authority would execute a new
Depository Agreement with its bank.
The Authority's High Rise Social account only required one
signature to withdraw funds. Although we did not find that
any funds had been inappropriately withdrawn, two
signatures should be required on each check to help ensure
withdrawals are authorized and necessary.
The Authority did not limit employees’ access to cash
collections and the petty cash fund. All of the Authority's staff
had access to cash collected from the laundry machines, and
the petty cash fund. The funds were maintained at the
Authority's office. Cash collections were kept in an unlocked
box and the petty cash fund was kept in a filing cabinet that
was unlocked during the business day. The Authority did not
have a petty cash custodian. As a result, the Authority created
a situation where funds could have been diverted without
detection. We did not find that the Authority's employees
took advantage of the opportunity to divert project funds.
The Housing Authority did not follow its Internal Monitoring
The Authority Did Not
Policy and HUD's requirements over cash. The Monitoring
Follow Adequate Cash
Policy says cash collections should be reconciled daily; cash
Controls
collections should be deposited in the bank intact;
disbursements should never be made from cash receipts; and
the Chairman of the Board or the Executive Director should
make periodic audits of cash collections. HUD Handbook
7511.1, Low-Rent Housing Guide, Chapter 3, Section 1, page
4, also states that cash receipts should be deposited in the bank
intact and disbursements should never be made from cash
receipts.
The Housing Authority's Assistant Executive Director and the
former Office Assistant said cash was not reconciled daily, and
the Chairman of the Board or Executive Director never audited
cash collections. We found the Authority did not deposit cash
collected from the laundry machines intact. The Authority kept
some of the cash from the laundry machines to make change
for tenants and to cash tenants' personal checks. Further, no
one from the Housing Authority was present when company
representatives and telephone company personnel collected and
counted cash from the Authority's vending machines and pay
telephone. Since no one from the Authority was present when
Page 13 98-CH-202-1003
Finding 2
cash was collected and counted, the Authority lacks assurance
as to the accuracy of the amount it received. The Executive
Director said, since the Housing Authority is small, he did not
believe any cash-related problems existed. However, HUD's
requirements over cash should be enforced to help reduce the
potential for cash related problems. The Executive Director
said the Authority would start following its Monitoring Policy
and HUD's requirements for cash collections.
The Housing Authority did not properly maintain records for
Checking Account its High Rise Social checking account. Specifically, the
Records Were Not Authority did not: (1) maintain adequate records identifying the
Adequate source of the proceeds deposited into the checking account;
and (2) report the account on its general ledger and audited
financial statements to HUD.
Section 9(B) of the Annual Contributions Contract says all
monies and investment securities received by or held for the
account of the Housing Authority in connection with the
development, operation and improvement of its projects
constitute the General Fund. Section 9(C) of the Contract says
the Authority will maintain records that identify the source and
application of funds in such a manner as to allow HUD to
determine that all funds are and have been expended in
accordance with each specific program regulation and
requirement. The Authority may withdraw funds from the
General Fund only for: (1) the payment of the costs of
development and operation of the projects; and (2) the
purchase of investment securities as approved by HUD.
Further, Section 15(A) of the Annual Contributions Contract
states that the Authority must maintain complete and accurate
books of account for the projects. Section 15(B) of the
Contract says the Authority must furnish financial and project
reports as required by HUD.
The Authority did not maintain adequate records identifying
the source of the proceeds in its High Rise Social checking
account. The Authority established the account in 1980. The
Assistant Executive Director said proceeds for the account
came from donations by tenants and private organizations such
as the local Lions Club, and receipts from the Authority's
vending machines. However, the Authority did not maintain
adequate records to identify the source of the proceeds in the
account. Without adequate records identifying the source of
98-CH-202-1003 Page 14
Finding 2
funds in the High Rise Social account, HUD lacks the ability to
determine whether proceeds were used for reasonable and
necessary project expenses. The account was used to pay for
such items as flowers for sick tenants, resident dinner parties,
and holiday decorations. The use of the funds for these
purposes would be appropriate if the source of funds was not
from the Authority’s operations.
The Authority did not report the High Rise Social account on
its general ledger and audited financial statements to HUD. As
of January 5, 1998, the account had a balance of over $1,800.
The Executive Director said he was not aware that the account
was not properly reported. As a result, the Authority created a
situation where funds could have been diverted without
detection. We did not find that any funds were diverted;
however, since the source of funds was not identified, we could
not verify that the use of the funds was reasonable and
necessary.
Excerpts paraphrased from the Authority’s comments on our
Auditee Comments draft finding follow. Appendix B contains the complete text of
the comments.
The Authority will segregate duties. Diana Imes will receive
collections and issue receipts. Pat Byers will record payments
and adjustments to tenant accounts. Diana Imes will prepare
bank deposit slips and Lavon Yoho will check and approve
them. Deposits will be made by Pat Byers. For the
Comprehensive Improvement Assistance Program, Diana Imes
will receive invoices and prepare checks for the Chairman of
the Board and the Executive Director’s signatures. Pat Byers
will mail completed documents.
A new Depository Agreement was completed on February 4,
1998.
Two signatures are now required on the High Rise Social Fund
account. We are in the process of determining what funds
belong to the Authority and will deposit the monies in the
General Fund.
Diana Imes will be the petty cash custodian.
Page 15 98-CH-202-1003
Finding 2
The Chairman of the Board or the Executive Director will
make periodic audits of cash collections. The Authority will
operate under HUD Handbook 7511.1, Low Rent Housing
Guide, Chapter 3, Section 1.
Money collected from the laundry is now deposited intact.
Funds from company vending machines will be counted,
correctly reported, and deposited intact.
Records of deposits and receipts for the High Rise Social
account are current from 1980 to date. The funds received are
from donations and were used for various functions for the
tenants. All such funds will be reported according to Section
9(B) of the Annual Contribution Contract.
The Authority has taken or plans actions that should correct
OIG Evaluation of the problems identified in the finding; however, the Authority
Auditee Comments needs to establish procedures and controls to ensure the actions
taken or planned are enforced in the future. Only monies in the
High Rise Social Fund that came from HUD’s resources need
to be deposited in the General Fund.
Recommendations We recommend that the Director of the Public Housing Hub in
Cleveland assures the Housing Authority of the Town of
Bloomfield:
2A. Segregated the duties of its employees to the extent
practical. No employee should have complete control
over a significant transaction. The duties should be
segregated to provide checks and balances on all work.
2B. Establishes procedures and controls to: (1) maintain a
current General Depository Agreement with its
financial institution; (2) require two signatures to
withdraw cash from the High Rise Social account; (3)
appoint a custodian for the petty cash fund; and (4)
restrict employees’ access to cash collections and petty
cash.
2C . Establishes procedures and controls to follow its
Internal Monitoring Policy and HUD's requirements
regarding cash including, but not limited to: (1)
reconciling collections daily; (2) assigning an Authority
98-CH-202-1003 Page 16
Finding 2
employee to participate in collecting and counting
funds from vending machines and the pay telephone;
(3) depositing collections intact; (4) stopping
disbursements from cash receipts; and (5) conducting
periodic audits of collections.
2D. Deposits the proceeds from the High Rise Social
checking account into the General Fund, unless the
Authority can support that the source of the funds was
not from the Authority's operations.
2E. Deposits all proceeds from the Authority's operations
into the General Fund.
2F. Reports the High Rise Social account on the
Authority's general ledger and audited financial
statements to HUD.
Page 17 98-CH-202-1003
Finding 2
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98-CH-202-1003 Page 18
Finding 3
Conflicts Of Interest Were Not Disclosed
The Housing Authority of the Town of Bloomfield did not follow its Procurement Policy, HUD's
requirements, and the State of Indiana's Code regarding conflicts of interest. The Housing Authority
did not: (1) disclose conflicts of interest to the public via Board meeting minutes; (2) obtain a waiver
from HUD for conflicts of interest; and (3) require its contractors to insert a provision prohibiting
conflicts of interest in each subcontract. The Executive Director was not aware of HUD's or the State
of Indiana's requirements regarding conflicts of interest and did not understand the importance of the
Authority's conflict of interest requirements. Rules that require the avoidance and reporting of conflicts
of interest are necessary to eliminate situations that could easily result in the misuse of funds, impede
free and open competition, and reduce public confidence in the Authority.
Section 515(A) of the Annual Contributions Contract states in
HUD’s Requirements part that the Local Authority shall not enter into any contract,
subcontract, or arrangement, in connection with any Project or
any property included or planned to be included in any Project,
in which any employee or officer of the Local Authority who
exercises any responsibilities or functions with respect to the
Project during his/her tenure or for one year thereafter has any
interest, direct or indirect. If any employee or officer
involuntarily acquires such an interest, and the interest is
immediately disclosed to the Local Authority and disclosure is
entered upon the minutes of the Local Authority, the Local
Authority, with prior approval of the Government may waive
the prohibition contained in the subsection: Provided, the
employee or officer of the Local Authority does not participate
in any action by the Authority relating to the contract,
subcontract, or arrangement.
HUD Handbook 7460.8 REV-1, Procurement Handbook for
Public Housing Agencies and Indian Housing Authorities, page
6-7, says clauses that should be included in housing authority
contracts are described in Appendix 28. Appendix 28 of the
Handbook, paragraph 9(d), states in part that a housing
authority will require its contractors to include in each
subcontract and consulting agreement provisions to eliminate
or neutralize conflicts of interest.
The Housing Authority's Procurement Policy dated March 31,
Housing Authority’s
1992, page 15, says that no employee, officer or agent of the
Requirements
Authority shall participate directly or indirectly in the selection,
award, or the administration of any contract if a conflict, real or
Page 19 98-CH-202-1003
Finding 3
apparent, would be involved. Such a conflict would arise when
a financial or other interest in a firm selected for award is held
by: (1) an employee, officer or agent involved in making the
award; and (2) his/her relatives which include brothers-in-law.
The Indiana Code, Title 36, Chapter 18, Section 11(a)(3),
State of Indiana’s states in part that a commissioner or employee of a housing
Requirements authority may not acquire or have any direct or indirect interest
in a contract or proposed contract for materials or services to
be furnished or used in connection with any housing project.
Further, Section 11(c) of the Code says if a commissioner or an
employee of a housing authority owns or controls a direct or an
indirect interest in any property included or planned to be
included in a housing project, he/she shall immediately disclose
the interest in writing to the authority. The disclosure shall be
entered upon the minutes of the authority. Failure to disclose
such an interest constitutes misconduct in office.
The Housing Authority did not follow its Procurement Policy,
Conflict of Interest HUD's requirements, or the State of Indiana's Code regarding
Requirements Were Not conflicts of interest. Specifically, the Housing Authority did
Followed not: (1) disclose conflicts of interest to the public via Board
meeting minutes; (2) obtain a waiver from HUD for conflicts of
interest; and (3) require its contractors to insert a provision
prohibiting conflicts of interest in each subcontract.
Conflicts of interest existed with the Assistant Executive
Director's brother-in-law and spouse, both of whom were
contractors for the Housing Authority. The Assistant
Director's brother-in-law is the owner of Byers Electric,
Heating and Cooling. The spouse of the Assistant Executive
Director owns DB Electric and Byers Trucking.
On May 2, 1996, the Authority awarded Byers Electric,
Heating and Cooling a contract for $229,854. The contract
related to electrical work on phase II of the high rise renovation
project funded by the Comprehensive Improvement Assistance
Program. The Housing Authority used a competitive process
to award the contract. Byers Electric, Heating and Cooling
was the lowest responsible bidder; however, the conflict was
not disclosed in the Board meeting minutes and a request for a
waiver was not submitted to HUD. Based on the Authority’s
architect's estimate and the other bid received, we determined
$229,854 was a reasonable cost for the work.
98-CH-202-1003 Page 20
Finding 3
The Housing Authority also used Byers Electric, Heating and
Cooling for three small purchases totaling $2,629. The
purchases were made between March 1994 and November
1997, related to electrical work, and did not require a contract.
The conflict of interest was not disclosed in the Board meeting
minutes and no waivers were requested. We determined two
of the purchases were reasonable; however, the Authority had
no documentation to show the reasonableness or necessity of
the third purchase for $860 from the Low-Income Housing
Program.
The Housing Authority paid DB Electric and Byers Trucking a
total of $6,374 between February 1994 and July 1997.
Electrical services at the Housing Authority's family project
accounted for $3,761 of the $6,374, and small jobs ranging
between $37 to $450 accounted for the rest ($2,613). Again,
the conflict was not disclosed in Board meeting minutes and no
waivers were requested from HUD. The work at the family
project totaling $3,761 was a result of a proposal requested by
the Authority's architect. However, there was no
documentation to support the reasonableness of the payment
made from the Comprehensive Improvement Assistance
Program.
The Housing Authority did not require its contractors to insert
a provision prohibiting conflicts of interest in each subcontract.
We reviewed four contracts awarded by the Housing Authority
between February 1994 and May 1997. None of the contracts
contained the required conflict of interest provision. The
provision is intended to eliminate or neutralize any potential
conflict of interest.
The Executive Director said he was not aware of HUD's or the
State of Indiana's requirements regarding conflicts of interest.
He said he was aware of the Housing Authority's Procurement
Policy regarding conflicts of interests; however, he believed the
Authority paid a reasonable price for the materials and services
received. Conflict of interest requirements were created to
eliminate the potential for misuse of funds and the appearance
of favoritism. Because of the relationships between the
Assistant Executive Director and several contractors, there was
an appearance of favoritism. Additionally, HUD lacks
assurance all funds were used for reasonable and necessary
expenses. There were no records to support the
Page 21 98-CH-202-1003
Finding 3
reasonableness and necessity for $4,621 expended on two
purchases involving identity of interests.
Excerpts paraphrased from the Authority’s comments on our
Auditee Comments draft finding follow. Appendix B contains the complete text of
the comments.
Future contracts will comply with the Annual Contribution
Contract, HUD Handbook 7460.8, The Procurement
Handbook for Public Housing Agencies, and the procurement
standards in 24 CFR Part 85.36. The Housing Authority
requires its contractors to publicly disclose conflicts of interest
in the minutes of the Board of Commissioners meetings.
In the future, the Authority will not contract with Byers
Electric, Heating and Cooling, D.B. Electric, and Byers
Trucking unless HUD’s approval is requested and confirmation
obtained.
The $860 payment to Byers Electric, Heating and Cooling was
for an emergency. The Authority believes the costs charged
were reasonable. The Authority’s architect believes the $3,761
charged by D.B. Electric for work on the family housing
project was reasonable.
If the Authority follows through on its plan to comply with all
OIG Evaluation of requirements for future contracts, it will reduce the
Auditee Comments procurement problems we identified. However, the Authority
also needs to ensure it complies with all requirements for
procurement actions that do not require a contract.
Our review determined that the Authority did not have
adequate procedures to publicly disclose conflicts of interest in
its Board meeting minutes.
Although the Authority believes the $860 payment to Byers
Electric, Heating and Cooling and the $3,761 payment to DB
Electric were reasonable, it did not provide documentation to
show how it arrived at that determination. The purchases were
not competitive and no cost estimates were prepared.
98-CH-202-1003 Page 22
Finding 3
Recommendations We recommend that the Director of the Public Housing Hub in
Cleveland assures that the Housing Authority of the Town of
Bloomfield:
3A. Establishes and implements procedures and controls to
publicly disclose conflicts of interest via Board meeting
minutes.
3B. Discontinues any future purchases and contracts with
Byers Electric, Heating and Cooling, DB Electric, and
Byers Trucking unless HUD’s approval is requested
and obtained.
3C. Provides documentation to support the reasonableness
of the $860 payment to Byers Electric, Heating and
Cooling and the $3,761 payment to DB Electric; or
reimburses the appropriate Programs for the amounts
that cannot be supported.
3D. Establishes and implements procedures and controls to
ensure that the Housing Authority requires its
contractors to insert a provision prohibiting conflicts of
interest in each subcontract.
Page 23 98-CH-202-1003
Finding 3
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98-CH-202-1003 Page 24
Finding 4
The Authority Lacked A Cost Allocation Plan
The Housing Authority of the Town of Bloomfield did not have a plan to allocate indirect costs among
its programs. The Housing Authority allocated all employees' salary costs and non-salary costs, with
the exception of phone costs, to the Low-Income Housing Program. Twenty dollars of phone costs
per month were arbitrarily charged to the Section 8 Program. The Low-Income Housing Program was
not reimbursed by the other programs. While the Housing Authority was cited by HUD during its July
1997 review for failing to establish a cost allocation plan, the Authority had not established a plan since
they were concentrating on correcting other issues cited in the review. As a result, the Housing
Authority's Low-Income Housing Program was overcharged and HUD lacks proper visibility over the
cost of its programs.
24 CFR Part 85.22(b) requires State, local, and Indian tribal
HUD’s Requirements governments to follow Office of Management and Budget
Circular A-87, Cost Principles for State and local governments.
According to 24 CFR Part 85.3, a local government includes
any public housing agency.
Office of Management and Budget Circular A-87, Attachment
Office of Management C, says State, local, and Federally-recognized Indian tribal
And Budget Circular governments shall establish a process to assign costs to
Requirements benefited activities on a reasonable and consistent basis. The
cost allocation plan provides that process. All costs and other
data used to distribute the costs included in the plan should be
supported by formal accounting and other records that support
the propriety of the costs assigned to Federal awards.
The Housing Authority lacked a plan to allocate indirect costs
A Cost Allocation Plan
to its programs. The Authority operates three HUD programs.
Was Not Established
The programs are Low-Income Housing, Section 8, and
Comprehensive Improvement Assistance. The Housing
Authority allocated all of its employees' salaries to the Low-
Income Housing Program even though employees spent time
related to the Authority's other programs. Additionally, the
Authority applied all of its non-salary indirect costs to the Low-
Income Housing Program with the exception of $20 dollars per
month that was arbitrarily charged to the Section 8 Program.
According to Office of Budget and Management Circular A-
87, housing authorities must establish a cost allocation plan to
allocate indirect costs. As a result, the Authority did not have
an accurate accounting for the cost of its programs.
Page 25 98-CH-202-1003
Finding 4
For example, we selected three Housing Authority employees
to determine the time they spent related to the various
programs in 1997. The three employees were the Executive
Director, Assistant Executive Director, and the Resident
Custodian. The Executive Director estimated he spent 50
percent of his time on the Comprehensive Improvement
Assistance Program, 47 percent on Low-Income Housing, and
three percent on the Section 8 Program. The Assistant
Executive Director estimated she spent about 75 to 85 percent
of her time on Section 8, with the remaining 15 to 25 percent
on the Low-Income Housing Program. Finally, the Resident
Custodian estimated he spent 95 percent of his time on Low-
Income Housing and five percent on the Comprehensive
Improvement Assistance Program.
The Authority incurred non-salary costs for insurance, utilities,
and trash collection for its administrative office. As previously
mentioned, all of the costs were charged to Low-Income
Housing with the exception of $20 per month in phone costs.
The Section 8 and the Comprehensive Improvement Assistance
Programs share the same office space with the Low-Income
Housing Program. Since the Section 8 and the Comprehensive
Improvement Assistance Programs benefit from the office
space, they are required to bear their share of the costs.
The Housing Authority was cited by HUD's Indiana State
Office of Public Housing during its July 1997 review for failing
to establish a cost allocation plan. HUD's finding has not been
closed. The Assistant Executive Director said she was unsure
of how to develop a cost allocation plan. The Housing
Authority had not requested assistance from HUD in
establishing a cost allocation plan because the Authority was
first concentrating on addressing other issues cited in HUD's
1997 review. We provided the Housing Authority with a copy
of Office of Management and Budget Circular A-87. The
Circular provides guidance on developing cost allocation plans.
The Assistant Executive Director said the Housing Authority
can have an acceptable plan by June 30, 1998.
98-CH-202-1003 Page 26
Finding 4
Excerpts paraphrased from the Authority’s comments on our
Auditee Comments draft finding follow. Appendix B contains the complete text of
the comments.
The Authority requested a plan for cost allocation from its fee
accountant. On February 23, 1998, Hawkins, Ash, Baptie &
Company was asked for recommendations to correct the
allocation of funds between Low Income and Section 8
Programs.
After the Authority has developed a cost allocation plan, it
OIG Evaluation of needs to reimburse the Low Income Housing Program for any
Auditee Comments excessive costs charged during 1997.
Recommendations We recommend that the Director of the Public Housing Hub in
Cleveland assures the Housing Authority of the Town of
Bloomfield:
4A. Develops a cost allocation plan in accordance with
Office Management and Budget Circular A-87 by June
30, 1998.
4B. Reimburses the Low Income Housing Program for any
excessive costs charged during 1997 once the cost
allocation plan is developed.
Page 27 98-CH-202-1003
Finding 4
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98-CH-202-1003 Page 28
Follow Up On Prior Audits
The was the first Office of Inspector General audit of the Housing Authority. The latest single audit
for the Housing Authority covered the fiscal year ended December 31, 1995. The report contained
three findings. None of the three findings are repeated in this report.
Page 29 98-CH-202-1003
Follow Up On Prior Audits
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98-CH-202-1003 Page 30
Appendix A
Schedule Of Questioned Costs
Recommendation Type of Questioned Costs
Number Ineligible 1/ Unsupported 2/
1B $1,199
1G 4,200
1L $4,352
3C 4,621
Total $5,399 $8,973
1/ Ineligible costs are costs charged to a HUD-financed or insured program or activity that
the auditor believes are not allowable by law, contract, or Federal, State, or local policies
or regulations.
2/ Unsupported costs are costs charged to a HUD-financed or insured program or activity
and eligibility cannot be determined at the time of audit. The costs are not supported by
adequate documentation or there is a need for a legal or administrative determination on
the eligibility of the cost. Unsupported costs require a future decision by HUD program
officials. This decision, in addition to obtaining supporting documentation, might involve a
legal interpretation or clarification of Departmental policies and procedures.
Page 31 98-CH-250-1003
Schedule Of Questioned Costs
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98-CH-202-1003 Page 32
Appendix B
Auditee Comments
HOUSING AUTHORITY of the TOWN of BLOOMFIELD, INDIANA
100 WEST MAIN STREET, BOX 801
BLOOMFIELD, INDIANA 47424
PHONE (812) 384-8866 - FAX (812) 384-8010
April 10, 1998
Heath Wolfe, Senior Auditor
Dept. Housing and Urban Development
Office of Inspector General
200 North High Street, Room 334
Columbus, OH 43215
Dear Mr. Wolfe,
In response to your letter dated March 26, 1998, with regards to the final audit findings,
I am submitting our reply for your review. Also, I agree with your audit findings and assure the Office
of the Inspector General that the finding will be corrected to meet H.U.D. guidelines and policies.
Sincerely,
Lavon Yoho
Executive Director
Enclosure
Page 33 98-CH-250-1003
Appendix B
THE HOUSING AUTHORITY DID NOT EFFECTIVELY MANAGE ITS UNITS
H.U.D. Requirements
The Bloomfield Housing Authority will adhere to H.U.D. Handbook 7486.1, the Public
Housing Demolition, Disposition and Conversion Handbook. Also, as stated in H.U.D.
Handbook 7510.1, Low-Rent Housing Accounting Handbook, Chapter 3, Section 12.
Resolution No. 98-4 has been submitted to H.U.D. for review for PIH Notice 96-27 for
addendum on Administrative Plan and Admission and Continued Occupancy Polilcy.
The Bloomfield Housing Authority agrees to the following recommendations:
A. Collect the cost of utilities on all commercial units determined by average usage
from project furnished utilities report.
B. Reimburse H.U.D. $1,199 for excess subsidy received between December 1996
And December 1997.
C. Lease with Beauty Shop was effective March 1, 1997. As per Board of
Commissioner's recommendation of 15% of gross sales is paid to B.H.A.
A copy of said contract will be sent to H.U.D. for approval.
D. Lease with Resident Custodian was completed. The Resident Custodian lease
states $100 per month for rent. The Resident Custodian is subject to call 24
hours a day. He responds to any and all emergencies.
E. As per Resolution 98-8
The Public Housing Low Rent Accounting Handbook (7510.1)
F. As per Resolution 98-9
The Public Housing Demolition Disposition and Conversion Policy (7486.1)
G. Reimburse public housing program $3600 from non-federal funds for lost rent
from Bloomington Hospital between December 1996 and December 1997.
H. The present lease will expire on December 31, 1998. A thirty day notice is
required by both parties on any change in lease. With Board of Commissioners
approval, a recommendation to negotiate a new lease effective July 1, 1998 for
$350 per unit.
98-CH-202-1003 Page 34
Appendix B
1. A copy of lease has been submitted to H.U.D. for Beauty Shop for review on rental
rate.
J. Upon reply from H.U.D. with regard to rental rate, the Housing Authority will
reimburse the public housing program.
K. Resolution 98-4 was sent to H.U.D. for review and approval. Housing 0pportunity
Extension Act of 1996.
L. A needs assessment for the Beauty Shop will be conducted to show support by the
tenants and feasibility for the service the Beauty Shop performs for our tenants.
When completed, if the assessment does not support the use of Comprehensive
Improvement Assistant Program, the Housing Authority will reimburse 4352 to its
C.I.A.P. from non-federal funds.
Page 35 98-CH-202-1003
Appendix B
BLOOMFIELD HOUSING AUTHORITY RESOLUTION 98-4
ADDENDUM to both Administrative Plan and the Admission and Continued Occupancy Policy.
WHEREAS, the Board of Commissioners of the Bloomfield Housing Authority is charged with establishing policies and
overseeing the fiscal administration and accounting practices of the Authority and,
THEREFORE, are adopting this policy to be added to the Administrative Plan and the
Admission and Continued Occupancy Policy.
POLICY, is to prohibit the admission to the Section 8 or Public Housing programs, any person who is illegally using a
controlled substance, the ineligibility if evicted for drug-related activity and terminating assistance to illegal drug users
and alcohol abusers.
A. Screening out illegal drug users and alcohol abusers.
The BHA has established standards that
prohibit the admission to Section 8 or Public Housing programs of any person who
the BHA determines is illegally using a controlled substance.
The BHA has established policies and procedures that prohibit admitting any person
in cases where the BHA determines that there is reasonable cause to believe that the
person abuses alcohol in a way that may interfere with the health, safety, or right to
peaceful enjoyment of the premises by other residents.
BHA may waive the policies prohibiting admission in these circumstances if the
person is no longer engaging in illegal use of a controlled substance or abuse of
alcohol and has successfully completed a supervised drug or alcohol rehabilitation
program.
B. Ineligibility if evicted for drug related activity.
Drug-related criminal activity is the illegal manufacture, sale, distribution, use or
possession with intent to manufacture, sell, distribute or use a controlled substance.
Persons evicted from any Public Housing or Section 8 programs because of drug-
related criminal activity are ineligible for admission to either Public Housing or the
Section 8 program for a three year period beginning on the date of such eviction.
The BHA may waive this requirement if:
The person demonstrates successful completion of a rehabilitation program
approved by the BHA, or the circumstances leading to the eviction no longer exist.
For example, the individual involved in drugs is no longer in the household because
the person is incarcerated.
C. Terminating assistance to illegal drug users and alcohol abusers.
The BHA has established standards that allow for the termination of Section 8
assistance or termination of the tenancy of any person who the BHA determines is
illegally using a controlled substance.
The BHA may terminate Section 8 assistance or terminate tenancy of any person if
the BHA determines that the person's abuse of alcohol interferes with the health,
safety or right to peaceful enjoyment of the premises by other residents.
D. Lease Provision
Public Housing lease forms and Section 8 dwelling lease must be amended to
provide that the following activities by a resident or participant are grounds for
termination of tenancy or assistance.
98-CH-202-1003 Page 36
Appendix B
BLOOMFIELD HOUSING AUTHORITY RESOLUTION 98-4
Drug related criminal activity on or off the premises, not just on or near the
premises, and alcohol abuse that the BHA determines interferes with the health,
safety or right to peaceful enjoyment of the premises by other residents.
In amending the lease form, the BHA has provided the tenants with notice and
opportunity to comment, according to the provision in 24 CFR 966.3. The
modification may be either in the body of the lease or in a lease addendum. Tenants
must be required to execute the new lease / addendum no later than their next re-
examination.
E. Grievance Procedures
Instates where HUD has determined that a court provides the elements of due
process, the BHA will bypass the grievance procedure in cases involving termination
of tenancy for any activity, not just on or near such premises.
F. Availability of Criminal Records
The law states that, not withstanding any other provision of law, the National Crime
Information Center, Police Departments, and other law enforcement agencies shall,
upon request, provide the BHA information regarding the criminal conviction
records of adult applicants for, or tenants of Public Housing for purposes of
applicant screening, lease enforcement and eviction.
This information must be provided for persons 18 years of age or older, or for those
convicted of a crime as an adult.
The provision of this paragraph (27) pre-empt any contrary provision in state, local
or tribal laws, and prevail over any contrary federal requirement. These provisions
do not pre-empt or limit any laws or Authority that permit broader access to records.
On request, the BHA must be provided the same information for juveniles, on to the
extent that the release of such information is authorized by state, local or tribal law.
While not addressed by the statute, the BHA must pay reasonable fees charged by
law enforcement agencies that provide the information. The applicant or tenant may
not be charged.
The BHA has established a system to ensure that any criminal record received be
maintained confidentially, not misused or improperly disseminated, and destroyed
once the purpose for which was requested is accomplished.
Before the BHA takes adverse action based on a criminal conviction record, the BHA
must provide the applicant or tenant with a copy of the criminal record and an
opportunity to dispute the accuracy or relevancy of the record, the opportunity to
dispute the record can be at an informal hearing for rejected applicants or at the
court hearing in the case of evictions.
G. Nondiscrimination
Nothing in this RESOLUTION relieves the BHA from complying with federal
requirements prohibiting unlawful discrimination. In particular, in implementing the
provisions described in this notice, the BHA must abide by federal laws prohibiting
discrimination on the basis of race, religion, sex color, national origin, age,
disability and family status.
Page 37 98-CH-202-1003
Appendix B
BLOOMFIELD HOUSING AUTHORITY RESOLUTION 98-4
The BHA must apply its procedures objectively in dealing with both applicants and
participants. Only and individual's particular behavior may be considered, not traits
that might be attributed to a specific group or category of people. The BHA should
carefully document the rationale for their decisions.
SAID RESOLUTION is hereby adopted on motion duly made, seconded and carried, and is a
part of the official records in the minutes of the Board of Commissioners of said Authority on
this day of 1998.
IN WITNESS WHEREOF, we have hereunto set our hands as Commission Members of the
Housing Authority of the Town of Bloomfield, on this day of 1998.
James Miller, Chairman Reba Street, Vice Chairman
Lowell Sparks, Member James Pearson, Member
John Allen, Member
98-CH-202-1003 Page 38
Appendix B
BLOOMFIELD HOUSING AUTHORITY RESOLUTION 98-8
The Public Housing Low Rent Accounting Handbook (7510.1)
Non-Dwelling Rental
This account shall be credited with the rent, including charges for utilities and equipment billed to
lessee of non-dwelling facilities and of dwelling units rented for non-dwelling purposes. This account
shall not be credited with charge to other projects or programs for central office management and
maintenance space.
SAID RESOLUTION is hereby adopted on motion duly made, seconded and carried, and is a part of
the official records in the minutes of the Board of Commissioners of said Authority on this day of
1998.
IN WITNESS WHEREOF, we have hereunto set our hands as Commission Members of the Housing
Authority of the Town of Bloomfield, on this day of 1998.
James Miller, Chairman Reba Street, Vice Chairman
Lowell Sparks, Member James Pearson, Member
John Allen, Member
Page 39 98-CH-202-1003
Appendix B
BLOOMFIELD HOUSING AUTHORITY RESOLUTION 98-9
The Public Housing Demolition, Disposition and Conversion Policy, (7486.1)
Written approval by H.U.D. shall be required before the BHA may undertake any conversion action.
To request such approval, the BHA shall submit a request to the field office for guidance on the
essential elements of the request. The PHA may cross-reference its C.I.A.P. application for
supporting documentation. The request shall include the following documentation.
A. A description of the property involves, including the following pertinent data:
1 Project name and number.
2 The total number of units in the project and the specific units and buildings for which
conversion is proposed.
3. The age of the project from the day of full availability.
4. Where appropriate, rehabilitation estimates, maintenance reports and other supporting
documentation.
SAID RESOLUTION is hereby adopted on motion duly made, seconded and carried, and is a part of
the official records in the minutes of the Board of Commissioners of said Authority on this day of
1998.
IN WITNESS WHEREOF, we have hereunto set our hands as Commission Members of the Housing
Authority of the Town of Bloomfield, on this day of 1998.
James Miller, Chairman Reba Street, Vice Chairman
Lowell Sparks, Member James Pearson, Member
John Allen, Member
98-CH-202-1003 Page 40
Appendix B
Housing Authority of Town of Bloomfield
100 West Main Box 801
Bloomfield, IN 47424
Phone (812) 384-8866 Fax 384-8010
March 9, 1998
Dept. of Housing and Urban Development
Heath Wolfe, Senior Auditor
Office of Inspector General
200 North High Street, Room 334
Columbus, OH 43215
Dear Mr. Wolfe,
I am responding to your second draft audit findings dated March 2, 1998.
The Authority lacked adequate cash management controls.
1. Segregation of duties for employees.
A. Diana Imes will receive collections and issue receipts. Pat Byers will record payment
and adjustments to tenant accounts. Bank deposit slips will be made by Diana Imes and
checked and approved by Lavon Yoho. Deposit will be made at bank by Pat Byers. In
the absence of an employee, the remaining employees will segregate duties.
B. The Comprehensive, Improvement Assistance Program
Diana Imes receives billing invoices and prepares check for signatures of James Miller,
Chairman of the Board, and Lavon Yoho, Executive Director. When completed, Pat
Byers will mail to proper receipient.
The Authority did not safeguard cash funds.
1. The general depository expired December 1, 1996. Upon information received of the
expiration, a new depository agreement was completed on February 4, 1998. A new
depository will be requested before due date.
Page 41 98-CH-202-1003
Appendix B
2. Hi-rise Social Fund account
A. As per your request, two signatures are required on this account. Also, we are in the
process of establishing what disbursement of this fund belongs to the Authority. When
completed, the Authority's money will be deposited in the General Fund.
3. Petty Cash
A. The petty cash fund was increased from $25.00 to $50.00. By increasing this fund, the
cash collections has been eliminated. Also, the petty cash will be under the control of
Diana Imes, the petty cash Custodian.
The Authority did not follow adequate cash controls.
1. The Housing Authority’s internal monitoring policy states that cash collections should be
reconciled daily, deposited in the bank intact and disbursements should never be made from
cash receipts. Also, the Chairman or Executive Director will make periodic audits of cash
collections. The Housing Authority will operate under HUD Handbook 7511.1, Low Rent
Housing Guide, Chapter 3, Section 1.
2. Money collected from laundry is now deposited intact. Money from company vending
machines will be counted and and correctly reported and deposited intact.
Checking account records were not adequate.
1. Records of deposits and receipts for the Hi-rise Social account are current from 1980 to date.
The funds received are from donations and are used for various functions for the tenants.
Any disbursement made was for items for the Improvement of service for the tenants. All
such funds will be reported as per Section 9B of the Annual Contributions Contract.
Conclusion
The Bloomfield Housing Authority will abide by our Internal Monitoring Policy and HUD
Handbook 7511.1, Low Rent Housing Guide, Chapter 3, Section 1.
If you have any questions or require further information, please contact me.
Yours truly,
Levon Yoho
Executive Director
98-CH-202-1003 Page 42
Appendix B
HOUSING AUTHORITY of the TOWN of BLOOMFIFLD, INDIANA
100 WEST MAIN STREET, BOX 801
BLOOMFIELD, INDIANA 47424
PHONE (812) 384-8866 " FAX (812) 384-8010
March 24, 1988
Heath Wolfe, Senior Auditor
Department of Housing and Urban Development
Office of Inspector General
200 North High Street Room 334
Columbus, OH 43215
Dear Mr. Wolfe,
I am responding to our third draft finding dated March 10, 1998.
CONFLICTS OF INTEREST WERE NOT DISCLOSED
A. Any future contracts will be conducted by the Procurement Policy that complies with
HUD's Annual Contribution Contract, HUD Handbook 7460.8, Procurement
Handbook for Public Housing Agencies, and the Procurement Standards of 24 CFR
85.36. Also, the Housing Authority requires its contractors to publicly disclose
conflicts of interest in the minutes of the Board of Commissioners meetings.
B. The Housing Authority has discontinued any future contracts and purchases with
Byers Electric, Heating and Cooling, D.B. Electric, and Byers Trucking unless HUD
approval is requested and confirmation is obtained,
C. Byers electric, Heating and Cooling total cost $860.25.
On March 10, 1994 at approximately 10:30 p.m. I received a call from Gerald
Hamlin, our Resident Custodian, regarding a power outage. Upon arrival it was
determined that a breaker and box had blown. This caused power failure for the air
handler circuit and system. Due to the emergency that existed, the repair needed to
be made. I decided to call Byers Electric at 7:30 a.m. the following morning. Mr.
Byers stated he would call Valley Electric at Vincennes to check on inventory for a
breaker. After calling, he drove to Vincennes to get breaker switch item (QMB323 ID
100A). Upon his return, the breaker switch was installed. When the power was
switched on we discovered the motor for our air handler system evidently had
overheated and was not operating. Mr. Byers and Gerald Hamlin checked and
found the motor was destroyed. Mr. Byers drove to Bloomington to get a motor
(M3157T Balton) and returned to install it.
Page 43 98-CH-202-1003
Appendix B
I have attached his bill for the switch, the motor, his cost and markup, and labor.
Due to the emergency that existed for this repair, I feel the cost was reasonable.
D.B. Electric work performed on electric contract for $3761.00.
I have reviewed from invoices furnished by Mr. Byers on material used for the Family
Housing Project.
Also, I have attached a letter dated February 6, 1998 from Mr. Larry W. Donovan,
our architect and engineer for this contract. Mr. Donovan explained the request for
bidders for electrical work for Contract number 4. No bids were received at the
September 6, 1995 bid awards. As stated in his letter after no bids were received,
he proceeded to get proposals for other contractors. As stated in the attached letter,
he received only one bid. This bid was from D.B. Electric for $3761.00. After
meeting with Mr. Donovan, we discussed his estimated cost for this contract. We
agreed to proceed with the D.B. Electric bid for this project. In Mr. Donovan's
opinion, the bid was reasonable.
In conclusion, I agreed to the third draft finding and assure you, as stated in this
response, that the conflict of interest will be corrected.
Respectfully Submitted,
Lavon Yaho
Executive Director
98-CH-202-1003 Page 44
Appendix B
HOUSING AUTHORITY of the TOWN of BLOOMFIELD, INDIANA
100 WEST MAIN STREET, BOX 801
BLOOMFIELD, INDIANA 47424
PHONE (812) 394-8866 * FAX (812) 384-8010
March 4, 1998
Heath Wolfe, Senior Auditor
Dept. Housing and Urban Development
Office of Inspector General
200 North High Street Room 334
Columbus, OH 43215
Dear Mr. Wolfe,
In response to your letter dated February 19, 1998, with regards to an audit finding for
cost allocations, I have requested a plan for cost allocation from our fee accountant.
I contacted Audrie Neal of Hawkins, Ash, Baptie & Co. on February 23, 1998 and asked
for recommendation to correct the allocation of funds between Low Income and Section
8 Programs.
I will forward this information when we receive it from our accountant.
Sincerely,
Lavon Yoho
Executive Director
Page 45 98-CH-202-1003
Appendix B
(THIS PAGE LEFT BLANK INTENTIONALLY)
98-CH-202-1003 Page 46
Appendix C
Distribution
Acting Secretary's Representative, Midwest
Senior Community Builder, Indiana State Office (2)
Director of Public Housing Hub, Cleveland Area Office (2)
Director of Public Housing Program Center, Indiana State Office (2)
Director of Field Accounting, Midwest
Deputy Secretary, SD
Assistant Secretary for Congressional and Intergovernmental Relations, J (Room 10120)
Deputy Assistant Secretary for Public Affairs, W (Room 10220)
Chief of Staff, S (Room 10000)
Counselor to the Secretary, S (Room 10234)
Senior Advisor to the Secretary for Communications and Policy, S (Room 10222)
Field Comptroller, Midwest
Assistant General Counsel, Midwest
Director, Office of Budget, ARB (Room 3270)
Assistant to the Deputy Secretary for Field Management, SDF (Room 7106)
Director of Administrative Service Center 1, New York State Office
Assistant Secretary for Public and Indian Housing, P (Room 4100)
Comptroller/Audit Liaison Officer for Public and Indian Housing, PF (Room 5156) (3)
Director of Troubled Agency Recovery, PB (Room 4148)
Director of Administration and Maintenance Division, PHMM (Room 4214)
Assistant to the Secretary for Labor Relations, (Acting), SL (Room 7118)
Acquisitions Librarian, Library, AS (Room 8141)
Chief Financial Officer, F (Room 10164) (2)
Deputy Chief Financial Officer for Finance, FF (Room 10164) (2)
General Counsel, C (Room 10214)
Associate General Counsel, Office of Assisted Housing and Community Development, CD
(Room 8162)
Director, Housing and Community Development Issue Area, U.S. GAO, 441 G Street N.W.,
Room 2474, Washington DC 20548
The Honorable John Glenn, Ranking Member, Committee on Governmental Affairs, United
States Senate, Washington DC 20515-4305
The Honorable Fred Thompson, Chairman, Committee on Governmental Affairs, United
States Senate, Washington DC 20515-4305
Mr. Pete Sessions, Government Reform and Oversight Committee, Congress of the United
States, House of Representatives, Washington, DC 20510-6250
Ms. Cindy Sprunger, Subcommittee on General Oversight and Investigations, Room 212,
O'Neil Office Building, Washington DC 20515
Executive Director, Housing Authority of the Town of Bloomfield
Chairman of the Board of Commissioners, Housing Authority of the Town of Bloomfield
Page 47 98-CH-250-1003
HA of the Town of Bloomfield, Bloomfield, In
Published by the Department of Housing and Urban Development, Office of Inspector General on 1998-05-06.
Below is a raw (and likely hideous) rendition of the original report. (PDF)