oversight

Followup on OIG Review, Assessment of Progress, Chicago Housing Authority, Chicago, Illinois

Published by the Department of Housing and Urban Development, Office of Inspector General on 1998-12-02.

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

                                                  U.S. Department of Housing and Urban Development
                                                  Office of Inspector General for Audit, Midwest
                                                  77 West Jackson Boulevard, Room 2646
                                                  Chicago, Illinois 60604-3507

                                                  Phone (312) 353-7832 Fax (312)353-8866
                                                  Internet http//www.hud.gov/oig/oigindex.html

                                                                    Audit Related Memorandum
                                                                               99-CH-201-1801

December 2, 1998

Memorandum For:        Debra A. Torres, Director of Public Housing, Illinois State Office


From:                  Dale L. Chouteau, District Inspector General for Audit, Midwest

Subject:               Followup on OIG Review
                       Assessment of Progress
                       Chicago Housing Authority
                       Chicago, Illinois

We completed a followup to the OIG September 30, 1996 review of the Chicago Housing Authority
entitled Assessment of Progress. The objective of our review was to determine whether the Authority
had taken appropriate actions to correct the problems identified in the previous report. Further, since
our previous review, the Authority’s Inspector General determined that the Authority expended HOPE
VI funds for two self sufficiency programs that did not achieve program objectives. Therefore, as part
of this review, we also assessed the adequacy of the Authority’s internal controls over the HOPE VI
self sufficiency programs and construction activities to ensure program goals and objectives are met.

The Authority took actions to address the problems found in our previous review; however, as with
any effort of this size, some actions were delayed or overlooked and require increased emphasis. Of
particular importance are those actions related to Security, Preventive Maintenance, Annual
Inspections, and Risk Management that can affect the living conditions of tenants. The Authority did
not have an adequate system of controls to ensure that projects funded by HOPE VI achieved their
program goals.

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 your staff have any questions, please have them contact me at (312) 353-7832.
Management Memorandum




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99-CH-201-1801                 Page ii
Executive Summary
We completed a followup to the OIG September 30, 1996 review of the Chicago Housing Authority
entitled Assessment of Progress. The objective of our review was to determine whether the Authority
had taken appropriate actions to correct the problems identified in the previous report. Since our
previous review, the Authority’s Inspector General determined that the Authority expended
HOPE VI funds for two self sufficiency programs that did not achieve program objectives.
Therefore, as part of this review, we also assessed the adequacy of the Authority’s internal
controls over the HOPE VI self sufficiency programs and construction activities to ensure
program goals and objectives are met.

The Authority took actions to address the problems found in our previous review; however, as with
any effort of this size, some actions were delayed or overlooked and need emphasis. We also
concluded that the Authority did not have an adequate system of controls to ensure that projects
funded by HOPE VI achieved their program goals.


                                      The Authority made progress in addressing the problems we
 The Authority Has Made
                                      identified in all 20 Chapters of our September 30, 1996
 Progress But Still Needs
                                      report. On September 14, 1998, the Authority was
 Improvements
                                      removed from HUD’s troubled housing list. However, the
                                      Authority stills needs to complete actions to correct
                                      problems identified during our previous review. We believe
                                      problems in the following four areas are particularly
                                      significant, since they more directly affect the living
                                      conditions of the tenants:

                                         Security - The Authority did not have a formal method
                                         for measuring the effectiveness of its security initiatives.
                                         The Authority Police Department’s senior staff, who
                                         were in place during our previous review, were no
                                         longer employed by the Authority. The Department’s
                                         current senior staff did not have a copy of the
                                         September 30, 1996 report and were unfamiliar with the
                                         recommendation to establish procedures and controls to
                                         establish and evaluate performance measures. As a
                                         result, no actions were taken to formally address the
                                         recommendations.

                                         Preventive Maintenance - The Authority did not develop
                                         and implement a preventive maintenance schedule for all
                                         systems using the needs assessment that was completed
                                         in May 1998. The Assistant Director of the Operational
                                         Services Division said he did not use the physical needs
                                         assessment to develop a comprehensive preventive
                                         maintenance program because the maintenance needs of
                                               Page iii                              99-CH-201-1801
Executive Summary


                          the developments were assessed annually.            The
                          Authority's annual assessments, however, did not
                          sufficiently address the preventive maintenance needs of
                          the developments. The inspections were not proactive
                          and only items in need of immediate repair were
                          addressed.

                          Annual Inspections - The Authority did not develop
                          thorough and comprehensive procedures for Housing
                          Quality Standards inspections. Between August and
                          October 1997, the Authority issued three memoranda to
                          its staff outlining procedures for annual building
                          inspections; however, the memoranda were not
                          comprehensive. The Authority did not develop or
                          implement policies and procedures to conduct quality
                          control reviews of Housing Quality Standards inspections
                          to ensure inspection accuracy, and did not ensure work
                          orders were initiated for needed repairs identified during
                          unit inspections.

                          Risk Management - The Authority’s Risk Management
                          Department performed annual inspections of all the
                          Authority’s buildings to identify hazardous conditions
                          that could result in a liability to the Authority. However,
                          no work orders were prepared because many of the work
                          items duplicated work orders previously requested by the
                          development managers, and the Risk Management
                          Department had not developed a method to eliminate
                          duplicate work orders.

                       Chapters 1 through 20 in this report provide an update to
                       the corresponding Chapters in our September 30, 1996
                       report.

                       Since our previous review, the Authority’s Inspector
 The Authority Lacks
                       General determined that the Authority expended HOPE VI
 Assurance Projects
                       funds for two self sufficiency programs that did not achieve
 Funded By HOPE VI
                       program objectives. As a result, as part of this review, we
 Meet Program Goals
                       assessed the adequacy of the Authority’s internal controls
                       over the HOPE VI self sufficiency programs and
                       construction activities to ensure program goals and
                       objectives are met. We found that the Authority did not
                       have an adequate system of controls to ensure that projects
                       funded by HOPE VI achieved their program goals.


99-CH-201-1801               Page iv
                                                        Executive Summary


                  We recommend that the Director, Office of Public Housing,
Recommendations   HUD Illinois State Office ensures the Authority takes
                  necessary actions to correct the problems cited in this
                  report. The recommendations in the previous report were
                  not controlled in HUD’s Audits Management System
                  because this followup review was scheduled.          The
                  recommendations in this report will be controlled in the
                  Audits Management System.

                  We presented the draft chapters and recommendations
                  included in this report to the Executive Director of the
                  Chicago Housing Authority. We held an exit conference
                  with the Authority’s Executive Director and other officials
                  on October 28, 1998. The Authority provided written
                  comments to our draft chapters and recommendations. The
                  complete text of the comments are included in Appendix A
                  with the exception of attachments to the comments that
                  were not necessary for understanding the Authority’s
                  comments. A complete copy of the comments including the
                  attachments was provided to HUD’s Office of Public
                  Housing.




                    Page v                           98-CH-201-1801
Executive Summary




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99-CH-201-1801                    Page vi
Table of Contents

Management Memorandum                                                       i


Executive Summary                                                       iii


Introduction                                                            1


Chapters

     Chapter 1 - Security                                               5


     Chapter 2 - Modernization/Redevelopment of Housing               11


     Chapter 3 - Work Order System                                    17


     Chapter 4 - Preventive Maintenance                               25


     Chapter 5 - Vacancy Reduction/Unit Turnaround                    29


     Chapter 6 - Funding for Maintenance and Modernization            35


     Chapter 7 - Annual Inspections                                   41


     Chapter 8 - Housing Management Functions                         47


     Chapter 9 - Admissions and Evictions                              53


     Chapter 10 - Rent Collections                                    59


     Chapter 11 - Procurement and Contracting                         63



                                 Page vii                    99-CH-201-1801
Table of Contents


       Chapter 12 - Accounting Systems and Controls      69


       Chapter 13 - Management Information System        73


       Chapter 14 - Asset Management                      79


       Chapter 15 - Risk Management                       85


       Chapter 16 - Personnel                             91


       Chapter 17 - Resident Program Delivery Systems    97


       Chapter 18 - Economic Development Opportunities
                       for Residents                     103


       Chapter 19 - Alternative Funding Sources          111


       Chapter 20 - Section 8                            115


       Chapter 21 - Hope VI                              119



Appendices
        A Auditee Comments                               129

        B Distribution                                   185




99-CH-201-1801                    Page viii
Introduction
The Chicago Housing Authority was organized in 1937 under the housing laws of the State of
Illinois. The Authority was established to develop, acquire, lease, operate and administer low rent
housing programs.

The Chicago Housing Authority is the third largest public housing authority in the Nation. It
administers over 57,274 public housing units located across the City of Chicago. The following
chart categorizes the Authority’s units:



                               Total Housing Units: 57,274
                                     9,914 units
                                                       2,833 units

                                                                      Family Housing
                                                                      Senior Housing
                                                                      Scattered Sites
                      23,390
                                                                      Section 8
                       units                                21,137
                                                             units



The Housing Authority received over $501 million in HUD operating subsidies over the last three
years. HUD also approved the Housing Authority for the following additional funding:

                  Sources                 1995                 1996                     1997
           Comprehensive Grant        $145,090,576          $145,203,346          $116,055,155
                Hope VI                    400,000            67,918,550
             Drug Elimination           10,008,250             9,278,539             9,050,270
                 TOTAL                $155,498,826          $222,400,435          $125,105,425

HUD classified the Housing Authority as operationally and financially troubled in 1979. On May
30, 1995, HUD took control of the Authority and designated the former Secretary’s
Representative of the Illinois State Office to serve as the Chairman of a five member Executive
Advisory Committee. The Committee served as the Authority’s Board of Directors. The former
Secretary’s Representative of the Illinois State Office resigned on November 21, 1997. On
December 31, 1997, Karen A. Newton, the Director for the Office of Troubled Agency Recovery,
was appointed as the Chairwoman of the Committee. The Authority’s Executive Director is
Joseph Shuldiner.

To address the Authority’s long standing problems, the Deputy Assistant Secretary for Distressed
and Troubled Housing Recovery sent a Blueprint to the Secretary on June 11, 1995; the Authority
developed a Long Term Strategic Plan dated February 15, 1996; and the Authority signed a
Memorandum of Agreement on August 20, 1996.


                                                   Page 1                                      99-CH-201-1801
Introduction


The Blueprint identified HUD’s goals as: (1) bringing meaningful, positive changes to the
Authority’s residents, and (2) strengthening the Authority in order to provide a safe, decent and
livable environment for its residents. The Authority was operationally restructured and its top
managerial positions were replaced. The Authority developed a Long Term Strategic Plan to
effectively translate the Blueprint into a functional mission-oriented improvement plan. The
Plan’s mission was to ensure the provision of affordable housing opportunities in viable
communities for lower-income households. The Memorandum of Agreement established
performance goals for the development of management systems and programs for treating the
severely distressed developments.

The Authority has made progress in all areas of the Memorandum of Agreement and on
September 14, 1998, was removed from the troubled housing list. HUD confirmed that the
Authority achieved a score of 64.73 on the Public Housing Management Assessment Program. A
public housing agency is designated as troubled if it achieves a score of less than 60 percent. The
following table shows the Housing Authority’s total Public Housing Management Assessment
Program scores from 1993 to 1997:

                                           PHMAP Scores


                        70%
                                                                         64.73%
                        60%          46.38%            48.69%
                        50%                                     45.92%
                        40%                   44.97%
                        30%
                        20%
                        10%
                         0%   0
                           Year   1993   1994    1995     1996     1997




                                      The objectives of this review were to: (1) determine
  Review Objectives                   whether the Authority had taken appropriate actions to
                                      correct the problems identified in the OIG report dated
                                      September 30, 1998; and (2) assess the adequacy of the
                                      Authority’s internal controls over the HOPE VI funded self
                                      sufficiency programs and construction activities to ensure
                                      program goals and objectives are met.

 Scope and Methodology                Our review assessed the actions taken by the Authority
                                      between June 1, 1996 through June 30, 1998. We extended
                                      the audit period as necessary. We performed the on-site
                                      work from March 1998 through September 1998. To
                                      evaluate the corrective actions taken or planned to address
                                      the issues and recommendations contained in the September
                                      30, 1996 report and to assess the adequacy of the
                                      Authority’s internal controls to ensure HOPE VI program

99-CH-201-1801                                  Page 2
                                               Introduction


goal and objectives are met, we interviewed appropriate
Authority managers and staff from all 21 functional areas
we reviewed. We interviewed the Authority’s Deputy
Executive Directors to verify the interpretation of policies
and procedures and to clarify staff responses. In addition,
we:

•   evaluated performance measures for security initiatives
    by interviewing Authority police, residents, and
    assessing the Authority’s Management Reports;
•   reviewed the Authority’s resident lease and evaluated its
    lease violation notice to ensure the Authority enforced
    house rules;
•   traced the Physical Needs Assessment to the
    Comprehensive Five-Year Action Plan to verify that the
    Assessment was used to prepare the Plan;
•   evaluated development maintenance plans to determine
    if they included a preventive maintenance schedule;
•   tested work orders for accuracy;
•   compared unit inspections to work order reports to
    verify that work orders were written for needed repairs;
•   interviewed maintenance and housing management staff
    to verify work order training, that employees had access
    to the computerized work order system, and that the
    system was used to monitor employee performance and
    the work order backlog;
•   evaluated housekeeping inspection documentation and
    waiting list procedures to assess resident screening;
•   contacted residents to determine if they were made
    aware of their lease requirements and had received
    tenant handbooks;
•   reviewed selected reports to determine if the accounting
    and management information systems provided useful
    information;
•   compared employee performance evaluations to staff
    job description to ensure employees were rated on their
    job responsibilities;
•   compared grant applications to the Authority’s funding
    records to determine if the Authority pursued alternative
    sources of funding; and
•   used the Authority’s Inspector General Reports, Grant
    Administration’s Monitoring Reviews, and Development
    Initiatives Division’s Management By Objective Reports
    and Annual Work Plans to assess the effectiveness of
    the controls to ensure HOPE VI objectives are met.
         Page 3                               99-CH-201-1801
Introduction



                 We provided a copy of this report to the Executive Director
                 of the Chicago Housing Authority.




99-CH-201-1801          Page 4
                                                                                     Chapter 1


                                       Security
The OIG review dated September 30, 1996 determined that the Authority did not have an
adequate system to evaluate the success of the security initiatives that had been and would be
implemented. Also, the Authority had not developed site-based security plans or house rules. As
a result, we recommended that the Authority: (1) develop procedures and controls to establish
and evaluate performance measures for each security initiative undertaken; (2) immediately start
to develop site-based security plans for the Cabrini Green, Ida B. Wells, Altgeld Gardens, and
ABLA Homes developments; (3) develop all site-based security plans by December 31, 1997; and
(4) develop house rules by December 31, 1996 and immediately begin to enforce the rules.


                                    The Authority did not develop procedures and controls to
 Observations                       establish and evaluate performance measures for each
                                    security initiative undertaken. The Authority also did not
                                    develop an overall site-based security plan for Cabrini
                                    Green, Ida B. Wells, Altgeld Gardens, and ABLA Homes,
                                    nor for any of its other developments, although it did
                                    develop a physical security plan for the Cabrini Green and
                                    ABLA Homes. However, physical security is only one
                                    aspect of an overall site-based security plan. The Authority
                                    developed house rules and was enforcing them.

                                    The Authority did not have a formal method for measuring
 Performance Measures               the effectiveness of its security initiatives. The Authority
 Were Not Established               Police Department’s senior staff, who were in place during
                                    our previous review, were no longer employed by the
                                    Authority. The Department’s current senior staff did not
                                    have a copy of the September 30, 1996 report and were
                                    unfamiliar with it. As a result, no actions were taken to
                                    formally address the recommendations. We provided a
                                    copy of the report to the Police Department’s senior staff
                                    during our review.

                                    The Authority’s Police Department provided us with the
                                    performance measures it was using to evaluate security
                                    initiatives included in HUD’s Blueprint, the Authority’s
                                    Memorandum of Agreement with HUD, and its Long-Term
                                    Plan, a total of 46 initiatives.       The Authority had
                                    performance measures for 40 of the initiatives.

                                    The Police Department’s performance measures for seven
                                    of the initiatives were adequate, but there was no
                                    documentation to show that required information was

                                              Page 5                             99-CH-201-1801
Chapter 1


                          gathered, evaluated and used to make decisions regarding
                          use of resources and the scope of the initiatives.

                          The measures for 33 of the 40 initiatives were not adequate
                          to determine if the initiatives were meeting their objectives.
                          The measures were merely indicators that the initiative had
                          been implemented, rather than a measure of the
                          effectiveness of the initiative. For example, one security
                          initiative was to open a mini-police station at Cabrini Green
                          and staff it with 11 officers. The performance measure
                          verified the opening of the mini-station and the assignment
                          of 11 officers. The performance measure did not evaluate
                          the impact that the opening of the mini-station had on
                          security at Cabrini Green. The purpose of the mini station
                          was to reduce criminal activity at and around Cabrini Green.
                          The performance measure should have evaluated the change
                          in criminal behavior by analyzing crime statistics and
                          feedback from residents and businesses.

                          The Police Department had not developed performance
                          measures for the remaining 6 initiatives. The Department
                          said it did not develop measures for five initiatives because
                          they believed the initiatives were the responsibility of
                          another department, and the sixth because it had not started.
                          We believe the measurement and tracking of all security
                          initiatives should be the responsibility of the Police
                          Department. Also, an initiative does not have to be
                          implemented for the Department to develop criteria on
                          which to measure it.

                          The Authority’s security plans were not prepared on a site-
 Site-Specific Security   specific basis. A site-based security plan contains a detailed
 Plans Have Not Been      analysis of crime patterns for each development. The plan
 Developed                outlines personnel, equipment, and physical improvements
                          required to enhance security measures.

                          In lieu of specific site-based security plans, the Authority’s
                          Police Department assigned officers to four Districts
                          (Central, West, North, and South), the Henry Horner
                          Detail, Administration, Special Assignments, a Special
                          Operations Group, and the Federal Task Force. The
                          officers were then deployed to individual developments by
                          the respective District and/or watch commanders. The
                          Authority also implemented community-oriented policing at


99-CH-201-1801                   Page 6
                                                                             Chapter 1


                          some of its family developments as part of its overall
                          security plan.

                          A site-based security plan analyzes crime patterns and
                          addresses unique security needs of each development. The
                          Authority’s approach to security assumes similar
                          developments have similar security problems and that the
                          same approaches can be used to address the problems.
                          Although the developments may have similar problems, the
                          developments are each different, do not necessarily mirror
                          each other, and have unique needs based on location,
                          configuration, and population mix. The site-based security
                          plan provides information that can provide a more efficient
                          allocation of resources than the Authority’s global
                          approach.

                          Although the Authority was not planning to develop a site-
Some Physical Site-       based security plan for each development, it had developed
Specific Security Plans   a physical security plan for the Cabrini Green, ABLA
Have Been Developed       Homes, Robert Taylor, and Henry Horner developments.
                          The physical modifications include fencing and controlled
                          access to buildings. However, a physical security plan is
                          only one part of a site-based security plan. The Authority
                          needs to develop a site-based security plan for each
                          development.

                          Without a formalized site-based security plan for each of its
                          developments, the Authority cannot properly prioritize
                          security initiatives and provide the most effective security at
                          the lowest cost.

                          In November 1996, the Authority incorporated house rules
House rules were          into its resident leases. Section Seven of the Authority’s
developed and enforced    lease, Resident’s Obligations, contains the house rules.

                          We contacted the managers of three developments to
                          determine if the house rules were being enforced. All three
                          managers provided us examples of house rule violators who
                          were referred to the Authority’s Legal Department for
                          eviction. We investigated six of the examples and found:
                          one resident was evicted; one resident moved out
                          voluntarily; in two cases the Authority worked an
                          agreement with the tenants that resolved the situation; and
                          two cases were being worked by the Legal Department.


                                   Page 7                                99-CH-201-1801
Chapter 1


                    Based on this information, we believe the house rules are
                    effective and are being adequately enforced.


                    Excerpts from the Authority’s comments follow. Appendix A,
 Auditee Comments   page 130, contains the complete text of the comments.

                    We disagree that the Authority did not develop procedures
                    and controls to establish and evaluate performance
                    measures. The information is indicated in the Authority
                    Management Report. We shall, however, be more detailed
                    and site-based for each initiative development by
                    development in a future report. Performance measures will
                    be implemented for all security initiatives.

                    A site-based security plan has been established in our patrol
                    strategy that is congruent with Chicago Alternative Policing
                    Strategy. The Strategy is the overall police services
                    delivery system for all of the City of Chicago. It is
                    community policing, problem solving policing, and utilizing
                    traditional and nontraditional approaches. The Authority’s
                    Police Department strategy is congruent with the
                    community policing, problem solving strategy of the
                    Chicago Alternative Policing Strategy. We shall document
                    the customized diversity of each strategy in operation at
                    each site.

                    The review indicated that the performance measure did not
                    evaluate the impact that the opening of the mini-station had
                    on security at Cabrini-Green. We disagree with this
                    observation. Not only was a mini-station opened at Cabrini-
                    Green, but it was expanded to a 24-hour station and the
                    Authority Management Report submitted to the OIG
                    documented substantial crime reduction in Cabrini-Green
                    for the year 1997. Crime reduction is an established
                    performance and output measure.

                    We shall develop and implement procedures and controls to
                    establish and evaluate performance measures for all security
                    initiatives undertaken. (Crime data analysis collections, time
                    surveys and resident satisfaction surveys).

                    We shall develop site based security plans. This will include
                    resource allocation of personnel and equipment, physical
                    improvements required to enhance security measures,

99-CH-201-1801             Page 8
                                                                           Chapter 1


                    community involvement in problem identification and
                    problem solving, and human resource and quality of life
                    initiatives.


                    The Authority indicated it had developed procedures and
OIG Evaluation of   controls to establish and evaluate performance measures. It
Auditee Comments    further indicated that the information was contained in the
                    Authority Management Report. The Report provides overall
                    statistical information on security related areas such as crimes,
                    complaints, arrests, and evictions. The Authority did not
                    maintain documentation to show that the Report was used to
                    evaluate the effectiveness of individual security initiatives.

                    There is no evidence that the Authority’s Police Department’s
                    community policing and problem solving strategy is site-based.
                    The Authority acknowledged that it needs to document the
                    customized diversity of each strategy in operation at each site.

                    The Authority indicated it will develop and implement
                    procedures and controls to establish and evaluate performance
                    measures for all security initiatives. The Authority also said it
                    would develop site based security plans. If the Authority
                    follows through on these two actions, the problems outlined in
                    this Chapter should be corrected.



Recommendations     We recommend that the Director of Public Housing, Illinois
                    State Office, assures that the Chicago Housing Authority:

                    1A.     Develops and implements procedures and controls
                            to establish and evaluate performance measures for
                            all security initiatives undertaken.

                    1B.     Develops site-based        security    plans     for   all
                            developments.




                             Page 9                                  99-CH-201-1801
Chapter 1




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99-CH-201-1801                  Page 10
                                                                                          Chapter 2


      Modernization/Redevelopment of Housing
The OIG review dated September 30, 1996 determined that the Authority had initiated plans for
the redevelopment of Cabrini Green, Henry Horner, Lakefront, Washington Park, and Clarence
Darrow developments. However, the Authority did not prepare a comprehensive plan for the
overall rehabilitation of the five developments or any of its other developments. The Authority
planned to complete a 20 year cash needs assessment to identify the capital needs and
expenditures for the Authority’s developments over the next 20 years by September 30, 1996 and
a viability study to assess the cost effectiveness of revitalizing its buildings by December 31, 1996.
Additionally, the Authority planned to complete a marketing study to develop a plan to support
full occupancy in viable buildings and developments by March 31, 1997.

We recommended that HUD assure that the Authority: (1) perform a viability assessment with a
20-year cash needs forecast by December 31, 1996; (2) develop a marketing plan by March 31,
1997; and (3) develop a comprehensive modernization/redevelopment plan for all of its
developments once the viability assessment and marketing plan were completed.


 Observations                          As of June 23, 1998, the Authority had completed the
                                       viability assessment and physical needs assessment with a
                                       20-year cash needs forecast. The Authority did not
                                       complete the marketing plan and did not develop a
                                       comprehensive modernization and redevelopment plan for
                                       all of its developments.

                                       The Chicago Housing Authority hired TAG Associates to
 The Viability Assessment              complete the Authority’s viability assessment. Under
 Has Not Been Approved                 Section 202 of the Omnibus Consolidated Rescissions and
 By HUD                                Appropriations Act, public housing agencies were required
                                       to identify distressed public housing that should be
                                       demolished and replaced with Section 8 tenant-based rental
                                       assistance, if the housing could not be economically
                                       revitalized. Based upon the requirements of Section 202,
                                       the Authority determined that a viability assessment was
                                       required for the following 17 developments: Brooks Homes;
                                       Brooks Extension; Jane Addams Homes; Grace Abbott
                                       Homes; Cabrini Extension North; Cabrini Extension South;
                                       Cabrini Rowhouses; Green Homes; Dearborn Homes;
                                       Henry Horner; Robert Taylor A; Robert Taylor B; Rockwell
                                       Gardens; Stateway Gardens; Washington Park; Wells
                                       Extension; and Wells Homes. The viability assessments
                                       identified buildings in 16 of the 17 developments that should
                                       be demolished or revitalized. The viability assessment for


                                                Page 11                               99-CH-201-1801
Chapter 2


                    Wells Homes is in process and is expected to be completed
                    by December 31, 1998.

                    In accordance with Section 202, seven of the 17
                    developments also required the completion of a second cost
                    test. These seven developments were: Dearborn Homes,
                    Cabrini Extension South, Green Homes, Rockwell Gardens,
                    Stateway Gardens, Wells Extension, and Wells Homes. The
                    Authority completed the second cost test for six of the
                    seven developments. The cost test required for Wells
                    Homes was in process. The six tests showed that the cost
                    to convert the public housing developments to Section 8
                    averaged 12 percent more than the cost of revitalization.

                    The 16 completed draft assessments and the six cost tests
                    were submitted to HUD’s Office of Policy, Program and
                    Legislative Initiatives for Public and Indian Housing for
                    approval on May 18, 1998. The cost test for Wells Homes
                    will be forwarded to HUD when completed. Before HUD
                    approves the Authority’s viability assessment, a marketing
                    study assessing the impact of unit demolition on affordable
                    housing in the area needs to be completed. The marketing
                    study is scheduled to be completed in the Spring of 1999.

                    On December 10, 1996, the Authority hired TAG
 A Physical Needs   Associates, who subcontracted with On-sight Insight, a
 Assessment Was     consultant that specializes in capital planning, to complete a
 Conducted          physical needs assessment of all the Authority’s
                    developments. The consultant conducted site visits of the
                    developments; identified development needs; and updated
                    the Authority’s capital improvements plan. A physical
                    needs assessment was completed for ninety-two
                    developments consisting of 1,060 buildings. The field work
                    for the assessment was completed between January 6 and
                    May 24, 1997.           The assessment reports for the
                    developments were issued between January 27 and June 14,
                    1997.

                    We believe the assessments provide necessary information
                    for future planning. Each development’s physical needs
                    assessment provides detailed information on the condition
                    of the development’s structures and systems; repair work
                    required; the age and expected useful life of the structures
                    and systems; a 20-year cash needs forecast for repairs and
                    replacements; and the year funds are needed. The Authority

99-CH-201-1801             Page 12
                                                                           Chapter 2


                         used the physical needs assessment to develop its Five-Year
                         Action Plan.

                         Although the Authority completed a viability assessment
 The Authority Has Not   and a physical needs assessment, it did not perform a
 Performed A Marketing   marketing study or develop a comprehensive modernization
 Study Or Developed A    and redevelopment plan for each development.
 Comprehensive Plan
                         The Authority’s Deputy Director of Management Analysis
                         and Planning said the Authority delayed the marketing study
                         pending the completion of the viability assessment in order
                         to avoid spending resources studying developments that
                         may not be viable. However, before HUD approves the
                         Authority’s viability assessment, a marketing study
                         assessing the impact of unit demolition on affordable
                         housing in the area needs to be completed. The marketing
                         study is now scheduled to be completed in the Spring of
                         1999. A marketing study and plan are needed to determine
                         what and where the demands are for the Authority’s
                         services, and to ensure scarce resources are used effectively
                         to address the demands.

                         The Authority did not develop a comprehensive plan for
                         each development. Although the plans cannot be completed
                         without marketing studies, we did not find any
                         documentation to support that comprehensive plans were
                         under development, or scheduled. Additionally, we did not
                         find that anyone was responsible to ensure the plans were
                         completed. A comprehensive plan is needed to ensure all
                         programs and initiatives for a development properly
                         interface, are consistent, and do not result in a waste of
                         resources. For example, the expenditure of modernization
                         resources should consider the interaction and impact of the
                         viability study, demand for units, available resources, the
                         physical needs assessment, and community input.


Auditee Comments         Excerpts from the Authority’s comments follow. Appendix A,
                         pages 136 and 145, contains the complete text of the
                         comments.

                         Director of Management Analysis and Planning Comments:
                         The report does not clearly state that, because of the
                         revitalization of the property, only seven were subject to the
                         cost test, the others were exempt based on the rule.

                                 Page 13                                99-CH-201-1801
Chapter 2



                     The report does not accurately reflect the status of
                     conducting market studies for our properties. It is true that
                     the Authority did not conduct an authority-wide market
                     study for various reasons: (1) market studies were already
                     underway at HOPE VI or proposed HOPE VI sites, and (2)
                     a market study was required and included in the scope of
                     the planners hired by Development Initiatives.             The
                     Development Initiatives Division has undertaken the task to
                     coordinate the results of any studies or planning activities.

                     Further the comments that say "since the viability only
                     covered 17 developments, we believe the marketing study
                     and the development of a plan should have already been
                     initiated" are not accurate. The sites included in the viability
                     assessment represent more than 1/2 of our stock. Plans
                     were generated as a result of the strategic planning process
                     occurring at various sites, and both the viability and physical
                     needs assessments are the first tools necessary to determine
                     what the market consists of. The site based waiting lists at
                     all senior properties will require a marketing analysis and
                     strategy.

                     We determined that the Authority did not conduct a marketing
 OIG Evaluation of   analysis and did not have any documentation to show when a
 Auditee Comments    study was planned or who is responsible. The Director of
                     Management Analysis and Planning does not oversee the
                     Development Initiatives Division. The planner contracts she
                     refers to in her comments do not require the performance of
                     marketing studies. The Development Initiatives Division did
                     not respond to our Chapter or indicate they were responsible
                     for the marketing studies. The Director of the Authority’s
                     Modernization Division said the Division will be responsible for
                     the marketing studies (see Director of Modernization
                     comments below).

                     We acknowledge that the 17 developments include more than
                     one-half of the Authority’s housing stock; however, that does
                     not change our conclusion that the marketing study and
                     development of a plan should have been initiated.




99-CH-201-1801               Page 14
                                                                        Chapter 2


Auditee Comments     Director of Modernization comments: The Modernization
                     Division concurs with HUD's recommendation that the
                     CHA conduct a marketing study and develop a
                     comprehensive plan for each of our developments.

                     In light of this, the Modernization Division will assume
                     responsibility for developing the Request For Proposal as
                     well as administering the contracts with the firms that will
                     conduct the marketing studies and subsequent plans. We
                     will submit to you a time schedule to complete this study in
                     the immediate future.

 OIG Evaluation of   The actions the Modernization Division plans should help
 Auditee Comments    resolve the problems identified in this Chapter if the Division
                     follows the actions through to completion. However, the
                     Authority still needs a comprehensive plan for each
                     development. The plan should, at a minimum, incorporate the
                     results of the marketing study and plan; viability assessment;
                     physical needs assessments; available and projected resources;
                     and input of the community.


 Recommendations     We recommend that the Director of Public Housing, Illinois
                     State Office, assures that the Chicago Housing Authority:

                     2A.    Performs a marketing study and based on the results
                            develops a marketing plan as required by HUD.

                     2B.    Develops a comprehensive plan for each
                            development. The plan should, at a minimum,
                            incorporate the results of the marketing study and
                            plan; viability assessment; physical needs
                            assessments; available and projected resources; and
                            input of the community.




                             Page 15                                99-CH-201-1801
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99-CH-201-1801                  Page 16
                                                                                        Chapter 3


                             Work Order System
The OIG review dated September 30, 1996 determined that the Chicago Housing Authority had
developed policies and procedures for its work order system. However, the policies and
procedures for emergency work orders were not sufficient to operate an effective work order
system and were not distributed to the appropriate personnel. The Authority established a
training class in work order management, but not all maintenance superintendents and supervisors
had attended. On April 1, 1996, the Authority began using a computerized work order system.
The system automated the work order process; however, the number of backlogged work orders
steadily increased to over 49,000 by the end of June 1996. The Authority established new
performance standards for its maintenance personnel, but did not plan to use the standards until its
January 1, 1997 performance evaluations.

We recommended that HUD assure the Authority: (1) reviewed its emergency work order
policies and procedures, developed procedures to operate the system effectively, and included the
new procedures in its maintenance manual; (2) trained all its maintenance superintendents and
supervisors on work order procedures by December 31, 1996; (3) distributed the revised
maintenance manual to all applicable personnel; (4) developed procedures to distribute weekly
activity reports to development managers and for the managers to use the weekly reports to
manage their work order backlog; (5) implemented the use of performance standards to monitor
staff performance; and (6) performed a review of the work order backlog, assessed staff needs,
and developed a "get well" plan if the backlog situation would result in less than a passing Public
Housing Management Assessment Program grade.


                                      As of July 14, 1998, the Chicago Housing Authority had
 Observations                         fully implemented three of the six recommendations from
                                      our previous report. The Authority trained its maintenance
                                      staff on its work order procedures, distributed work order
                                      reports to development managers, and implemented the use
                                      of performance standards to monitor staff performance. In
                                      addition, although the Authority developed emergency work
                                      order policies and procedures to operate an effective
                                      emergency work order system as suggested by our fourth
                                      recommendation, the Authority needed to expand the
                                      procedures in relation to code violation emergency work
                                      orders. The Authority also did not ensure all applicable
                                      personnel received its maintenance manual; and did not
                                      develop a plan to address its work order backlog.

                                      The Authority trained all of its maintenance superintendents
 The Maintenance Staff                and supervisors on its work order procedures. The
 Received Training On                 Authority’s Customer Service Center held three classes on
 Work Order Procedures

                                               Page 17                               99-CH-201-1801
Chapter 3


                           general work order procedures, recording work orders in its
                           automated system, and closing out work orders.

                           We interviewed seven employees from one privately
                           managed development and two Authority managed
                           developments to verify that the employees received the
                           training. All the employees we talked to attended the
                           training offered by the Customer Service Center.

                           The Authority’s Management Analyst for Operational
 Work Order Reports Were   Services distributed daily completed work order reports to
 Distributed To Staff      all regional, property, and housing managers. The work
                           order reports identified the number of work orders
                           completed during a day. The Authority’s Manager for the
                           Customer Service Center distributed a daily outstanding
                           emergency work order report to all regional, property and
                           housing managers. The report identified all emergency
                           work orders outstanding.

                           We interviewed two of the Authority’s regional managers
                           and three managers at two developments to determine if
                           they received the work order reports. The staff said they
                           received the daily work order reports from the Authority’s
                           Operational Services Division and the Customer Service
                           Center. We verified that the managers used the reports to
                           track outstanding work orders and monitor the staff's
                           performance.

                           The managers said they also have access to the automated
                           work order system and have the ability to print additional
                           reports they deem necessary to manage work orders. We
                           verified that the managers had access to the system and
                           were able to print reports. We believe the Authority’s
                           managers have sufficient information available to them to
                           effectively manage the work orders.

                           The Chicago Housing Authority implemented the use of
 Performance Standards
                           performance standards to monitor staff performance. We
 Were Used To Evaluate
                           reviewed 23 performance evaluations for housing
 Staff
                           management and maintenance employees to determine if the
                           Authority used the standards to evaluate its staff. All
                           employee evaluations referenced performance standards
                           related to the employees’ responsibilities. For example, the
                           maintenance employees were evaluated on standards related


99-CH-201-1801                    Page 18
                                                                        Chapter 3


                       to timely completion of work orders, service provided to
                       customers, and ability to complete a task in one visit.

                       We reviewed the Authority’s emergency work order
Emergency Work Order   procedures and found that, with the exception of emergency
Procedures Were        code violation work orders, the procedures included the
Improved               necessary elements for an effective system. The procedures
                       were included in the Authority’s maintenance manual. We
                       tested 11 standard emergency and three code violation
                       emergency work orders to determine if they were processed
                       in accordance with the policies and procedures. Overall, we
                       found the Authority’s personnel followed the work order
                       procedures. However, we found some required information
                       was missing on two emergency and one code violation
                       emergency work orders. The two standard emergency work
                       orders were missing tenant signatures and one was missing
                       the material used. The code violation emergency work order
                       was missing the supervisor's initials. Tenant signatures and
                       supervisor initials on completed work orders helps assure
                       that work is satisfactorily completed. Recording of material
                       used acts as a safeguard against misuse of materials and
                       serves as a source of information for determining inventory
                       levels and reorder points.

                       In March 1998, the Customer Service Center began
                       performing quality control audits of completed work orders.
                       At the time of our review, audits had not been completed on
                       the developments involving our sample work orders.
                       However, we reviewed the quality control procedures and a
                       sample report and found the procedures and report
                       encompassed all items to be completed on the work orders
                       for proper close-out. We believe the audits will help correct
                       the type of problems we discovered in our sample of
                       emergency work orders, if the audits are diligently
                       conducted and reported.

                       The Authority’s emergency work order procedures need to
                       be expanded to include steps to ensure emergency code
                       violation work orders are expeditiously identified and input
                       to the work order system with the correct receipt date. The
                       Authority used the date it input code violation work orders
                       into its work order system as the request date. However,
                       the request date should be the date the notice of a violation
                       is received from the City. For work orders that are not
                       generated at the same time a complaint is received, HUD’s

                               Page 19                               99-CH-201-1801
Chapter 3


                           Public Housing Management Assessment Program
                           regulations require a housing authority to report the
                           date/time the request is received and entered into the
                           system. We found that the three code violation emergency
                           work orders we reviewed did not identify the date the
                           Authority received the written notice of the violations from
                           the City. Additionally, the Authority did not enter the
                           violations into the system until five, nine and 18 days after
                           the Authority received the notice of violation. HUD’s
                           Public Housing Management Assessment Program requires
                           all emergency work orders to be abated within 24 hours.

                           The Authority’s Customer Service Center Manager said the
                           code violation work orders were not entered timely due to a
                           shortage of staff. However, we determined the problems
                           occurred because the Authority’s work order procedures
                           did not contain adequate instructions for entering work
                           orders generated at a different time than when the request
                           was received. The procedures also did not contain steps to
                           ensure written packages from the City were immediately
                           reviewed to identify emergency conditions for immediate
                           input to the system. As a result, the Authority’s completion
                           times for the code violation work orders were understated.
                           Additionally, emergency repairs were not abated within 24
                           hours.

                           The Authority did not assure that all maintenance staff
 Maintenance Staff Did
                           received the maintenance manual. According to the
 Not Receive The
                           Customer Service Center Manager, the maintenance manual
 Maintenance Manual
                           was given to staff when they attended training on the work
                           order system. We interviewed 45 employees from one
                           privately and two Authority managed developments to
                           determine if the staff received the maintenance manual.
                           Eleven of the 45 employees said they did not receive the
                           manual. The Authority could not provide an explanation as
                           to why the employees did not receive a copy.

                           To ensure the consistent application of the Authority’s
                           procedures, it is imperative that all staff be given copies of
                           the maintenance manual.

                           The Authority did not develop a “get well” plan to reduce
 A Plan To Target          the work order backlog and has not obtained a passing
 Outstanding Work Orders   Public Housing Management Assessment Program grade for
 Has Not Been Developed    work orders. Outstanding work orders rose from 49,411 as

99-CH-201-1801                    Page 20
                                                Chapter 3


of June 1996 to 56,200 in June 1998, an increase of 6,789.
The Authority attributed the increase to a better tracking
system and increased attention on annual inspection, code
violation, and preventive maintenance work orders.
Additionally, in July 1997, the Authority revised its work
order policy to classify defective smoke detectors as an
emergency. Non-emergency work orders for defective
smoke detectors issued prior to July 1997 were reclassified
as emergency.

The Authority took steps to reduce the increased backlog
problem. In June 1997, the Authority assigned work order
teams to address outstanding code violation and emergency
work orders. The teams consisted of craftspeople and
maintenance mechanics who were dedicated to the
Operational Services Division to address the work order
backlog.

Between September and December 1997, a weekly
newsletter on the work order system was published. The
Authority’s developments are segregated into five regions.
Regions one through four include Authority managed
developments and the fifth region includes all privately
managed developments. The newsletter included data on
work orders, such as, the week’s best and worst
performance by region. The newsletter was used as a
motivational tool. Regions began competing against one
another to achieve the highest work order completion rate.

As a result of its actions, the Authority reduced its
percentage of work orders outstanding from 21 percent as
of December 31, 1996 to 17 percent as of December 31,
1997. The following table illustrates the decrease in the
percentage of outstanding work orders at year-end:




                                    12/31/96     12/31/97
Work Orders Requested               189,479      303,414
Work Orders Completed              (149,239)    (251,870)

       Page 21                              99-CH-201-1801
Chapter 3


                     Total Outstanding Work Orders          40,240       51,544
                     Percentage of Work Orders               21%          17%
                     Outstanding

                     Although the Authority reduced its percentage of work
                     orders outstanding, the Authority received a failing score
                     for work orders in its latest Public Housing Management
                     Assessment submitted to HUD on February 27, 1998. The
                     Authority needs to develop a plan to reduce its backlog of
                     outstanding work orders. If the backlog is not reduced, the
                     Authority will continue to receive a failing grade for
                     completion of emergency and routine work orders.


Auditee Comments     Excerpts from the Authority’s comments follow. Appendix A,
                     page 177, contains the complete text of the comments.

                     The Authority shall revise its work order procedures to
                     address work orders not generated when received and to
                     include procedures that ensure code violations from the City
                     of Chicago are properly recorded and completed. All
                     applicable Housing management staff shall receive the
                     Authority's preventive maintenance manual by March 31,
                     1999. Housing Management procedures shall be revised to
                     ensure maintenance manuals are properly disseminated. The
                     Authority is currently revising it's procedures to ensure
                     outstanding work orders are addressed and completed in a
                     timely manner.


                     The actions the Authority plans to take should correct the
 OIG Evaluation of   problems presented in this Chapter if the actions are followed
 Auditee Comments    through to completion.



 Recommendations     We recommend that the Director of Public Housing, Illinois
                     State Office, assures that the Chicago Housing Authority:

                     3A.    Revises its work order procedures to address work
                            orders not generated when received and to include
                            steps that ensure code violation packages from the City
                            of Chicago are immediately reviewed to identify
                            emergency conditions for immediate input to the work
                            order system.


99-CH-201-1801              Page 22
                                               Chapter 3


3B.   Distributes the maintenance manual to applicable
      personnel.

3C.   Develops a plan to reduce its backlog of outstanding
      work orders.




      Page 23                              99-CH-201-1801
Chapter 3




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99-CH-201-1801                  Page 24
                                                                                    Chapter 4


                       Preventive Maintenance
The OIG review dated September 30, 1996 determined that the Chicago Housing Authority
implemented a preventive maintenance program for its heating systems, but did not have a
preventive maintenance program for other mechanical systems or its units. We recommended that
HUD assure that the Authority develop a funding plan for the repair of maintenance deficiencies
and use the physical needs assessment to develop and implement a preventive maintenance
schedule by June 30, 1997.


                                    As of June 17, 1998, the Chicago Housing Authority
 Observations                       developed a funding plan for the repair of maintenance
                                    deficiencies. Additionally, the Authority implemented a
                                    preventive maintenance program for the elevator systems,
                                    and for rodding and catch basin cleaning for its high-rise
                                    units. However, the Housing Authority did not use the
                                    physical needs assessment to develop and implement an
                                    overall preventive maintenance schedule.

                                    The Chicago Housing Authority developed a funding plan
 A Funding Plan Was                 for the repair of maintenance deficiencies. The Authority
 Developed                          used the physical needs assessment to develop their
                                    Comprehensive Grant Program Five-Year Action Plan
                                    which was approved by HUD on September 18, 1998. We
                                    reviewed the portion of the Five-Year Plan that related to
                                    the Judge Green and Harold Ickes developments and found
                                    the Five-Year Action Plan detailed capital improvements at
                                    the developments and the amounts budgeted for the work.
                                    It appears that the Authority has developed an adequate
                                    funding plan for its Comprehensive Grant Program;
                                    however, the plan does not include a periodic schedule for
                                    preventive maintenance to prolong the life of existing
                                    systems.

                                    The Authority did not meet its target date of June 30, 1997
 The Needs Assessment               to develop and implement a preventive maintenance
 Was Not Used To                    schedule for all systems using the physical needs assessment
 Develop A Preventive               (see Chapter 2). The Authority’s Operational Services
 Maintenance Program                Division is responsible for the implementation and oversight
                                    of the Authority's preventive maintenance program. The
                                    Assistant Director of the Operational Services Division said
                                    he did not use the physical needs assessment to develop a
                                    comprehensive preventive maintenance program because the


                                            Page 25                              99-CH-201-1801
Chapter 4


                          maintenance needs of the developments were assessed
                          annually.

                          In lieu of a formalized preventive maintenance program for
                          all systems based on the needs assessment, the Authority
                          assessed the maintenance needs of the developments
                          annually. In the fall of 1997, the Authority established an
                          in-house committee, comprised of staff from the Authority's
                          non-Maintenance Division to conduct annual inspections of
                          the developments’ building exteriors, common areas, and
                          mechanical systems. Work Orders were written for below
                          average or unsatisfactory items found during the
                          inspections.

                          The Authority's annual assessments however, did not
                          sufficiently address the preventive maintenance needs of the
                          developments. The inspections are not proactive and only
                          items in need of immediate repair are addressed. The
                          Authority does not have a program addressing ways to
                          extend the life of building systems and structures. A
                          preventive maintenance program should identify repair
                          actions that are necessary throughout the year to prevent
                          equipment failures and the need to perform unscheduled
                          maintenance.

                          The Authority implemented preventive maintenance
 The Authority Had        schedules for its elevators and high-rise plumbing systems in
 Preventive Maintenance   addition to its program for heating systems that we
 Schedules For Some       mentioned in our previous report.            However, these
 Systems                  programs are only a start. The Authority still needs to
                          develop a preventive maintenance program for its other
                          systems and units incorporating the results of the needs
                          assessment. The Authority should also reevaluate the
                          preventive maintenance schedules it has developed for the
                          elevators, plumbing, and heating systems to ensure the
                          results of the needs assessment are adequately addressed.



Auditee Comments          Excerpts from the Authority’s comments follow. Appendix A,
                          page 137, contains the complete text of the comments.

                          The sections relevant to viability and the completion of the
                          physical needs assessment are correct.


99-CH-201-1801                   Page 26
                                                                        Chapter 4


                    It should be stated that the Physical Needs Assessment was
                    not commenced for the purpose of developing a preventive
                    maintenance program. Rather, it was completed to assist
                    the Authority to develop and prioritize its modernization
                    dollars. The Authority agrees that the data can be
                    incorporated into the Authority's preventive maintenance
                    plan.


                    The OIG understood the initial purpose of the physical needs
OIG Evaluation of   assessment. In our previous report, we recommended that the
Auditee Comments    physical needs assessment also be used to develop a preventive
                    maintenance schedule. The physical needs assessment provides
                    the Authority with a valuable tool to develop an effective
                    preventive maintenance program. Although, the Authority
                    agreed that the data could be incorporated into the Authority’s
                    preventive maintenance plan, it did not provide any specific
                    actions it plans to take in that regard. The Authority’s
                    comments did not address the development of a funding plan
                    or a preventive maintenance program.



Recommendations     We recommend that the Director of Public Housing, Illinois
                    State Office, assures that the Chicago Housing Authority:

                    4A.    Uses the physical needs assessment to develop and
                           implement preventive maintenance schedules for all
                           systems and developments.

                    4B.    Verifies that the established preventive maintenance
                           programs adequately address the results of the needs
                           assessment.




                            Page 27                                99-CH-201-1801
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99-CH-201-1801                  Page 28
                                                                                        Chapter 5


           Vacancy Reduction/Unit Turnaround
The OIG review dated September 30, 1996 determined that the Authority did not have an
effective Vacancy Reduction/Unit Turnaround Program. Specifically, the Authority did not:
adequately track unit turnaround information at the development level; included non-dwelling
units in calculating its vacancy rate; did not ensure that units completed under the Vacancy
Reduction Program met HUD’s Housing Quality Standards; and did not coordinate the
rehabilitation and occupancy of units between the Vacancy Reduction Department, Development
Managers, and the Occupancy Department.

As a result, we recommended that the Authority: (1) implement weekly tracking of unit
turnaround from date of vacancy to reoccupancy and implement a reporting system to track
vacant unit turnaround at the development level by December 31,1996; (2) expeditiously identify
and deprogram all non-dwelling units; (3) develop procedures to verify that units completed under
the Vacancy Reduction Program meet HUD’s Housing Quality Standards; and (4) develop
coordination procedures between the Vacancy Reduction Department, Development Managers,
and the Occupancy Department.


                                     The Authority took actions that resolved one of the four
 Observations                        recommendations from our previous report. The Authority
                                     deprogrammed all non-dwelling units.

                                     Although the Authority implemented a system for tracking
                                     unit turnaround time from the date of vacancy to the date of
                                     reoccupancy, the information was incomplete and inaccurate
                                     and as a result was not used by development managers. The
                                     Authority did not develop procedures to verify that
                                     rehabilitated units met HUD’s Housing Quality Standards.
                                     Also, the Authority did not develop coordination
                                     procedures between the Force Account Labor Department,
                                     Occupancy Department, and the Development Managers.

                                     The Authority identified and deprogrammed all non-
 Non-Dwelling Units Were             dwelling units. On June 30, 1997, HUD approved the
 Deprogrammed                        Authority’s request to designate 663 units as non-dwelling
                                     units, all of which were subsequently deprogrammed.

                                     The Authority implemented a system for tracking the unit
 The Authority Was Not               turnaround time from the date of vacancy to date the of
 Properly Tracking Unit              reoccupancy. However, the tracking system did not include
 Turnaround                          information regarding the number of days units were vacant
                                     prior to repair/rehabilitation, the time to repair/rehabilitate
                                     each unit, or the time it took to occupy a unit after it was

                                              Page 29                               99-CH-201-1801
Chapter 5


                           repaired. Also, the tracking system improperly included the
                           time that units were undergoing major rehabilitation under
                           the Modernization or Vacancy Reduction Programs. HUD
                           Handbook 7460.5 exempts Modernization units from the
                           calculation of unit turnaround time. As a result, the
                           turnaround information was incomplete, inaccurate and of
                           little use to Development Managers.

                           The Authority did not develop procedures to ensure that
 Procedures To Ensure
                           rehabilitated units meet HUD’s Housing Quality Standards.
 Units Met Housing
                           Rehabilitation of vacant units is currently performed by the
 Quality Standards Were
                           Modernization       Division’s   Force     Account    Labor
 Not Developed
                           Department. Previously, units were rehabilitated under the
                           Vacancy Reduction Program which ended in September
                           1997.

                           Under the current Force Account Labor Department’s
                           procedures, a unit turnover punch list is completed by both
                           a Housing Management Department representative and a
                           Force Account Labor Department representative. The list
                           indicates the rehabilitation work that was completed and the
                           overall condition and cleanliness of the unit. However, the
                           punch list does not indicate whether the unit meets HUD’s
                           Housing Quality Standards.

                           Our prior audit determined that rehabilitated units did not
                           always meet HUD’s Housing Quality Standards. Because
                           the Authority did not implement our recommendation to
                           develop procedures to ensure that units meet HUD’s
                           Housing Quality Standards, there is no assurance that
                           rehabilitated units are decent, safe, and sanitary.

                           There were no coordination procedures between the Force
 Rehabilitation Of Units
                           Account Labor Department, Development Managers, and
 Was Not Coordinated
                           the Occupancy Department regarding the availability of
 With The Occupancy
                           rehabilitated units.     There was also no coordination
 Department
                           regarding the prioritization of units to rehabilitate based on
                           the greatest demand.

                           The lack of coordination procedures resulted in units
                           remaining vacant for extended periods. For example,
                           between February and April 1998, the Force Account Labor
                           Department rehabilitated 73 units at the Rockwell Gardens
                           Development. As of August 31, 1998, less than half of the
                           rehabilitated units were occupied. In May 1998, the Force

99-CH-201-1801                    Page 30
                                                                      Chapter 5


                   Account Labor Department rehabilitated three units at the
                   Prairie Courts Development. Two of the three units were
                   not occupied until August 1998.          The Director of
                   Occupancy said the units were not filled timely because
                   there was a lack of demand. Proper coordination should
                   have identified the lack demand before resources were spent
                   to rehabilitate the units.

                   As of October 13, 1998, the Authority placed the
                   Modernization Force Account Labor Department under the
                   Housing Management Department.            The Housing
                   Management Department is planning to develop formal
                   coordination procedures between the Force Account Labor
                   Department, Development Managers, and the Occupancy
                   Department.


                   Excerpts from the Authority’s comments follow. Appendix A,
Auditee Comments   pages 156 and 177, contains the complete text of the
                   comments.

                   The Authority is currently revising it's computer system
                   records to include tracking the number of days units were
                   vacant prior to repair/rehabilitation, the time to repair each
                   unit and the time it took to reoccupy a unit after is was
                   repaired.

                   The Modernization Division believes that a system for
                   verifying that rehabilitated units meet HUD’s Housing
                   Quality Standards is already in place. The punch list
                   referenced in the report actually encompasses all the
                   requirements necessary to assure that each unit is decent,
                   safe, and sanitary according to Housing Quality Standards,
                   and is approved by management as part of the process of
                   accepting the unit for reoccupancy.

                   We believe that the examples cited in the report did not
                   accurately represent the complete circumstances
                   surrounding these assignments. In the case of the Rockwell
                   Gardens property at 2450 West Monroe, these units had
                   previously been occupied by Rockwell residents who had
                   vacated these units specifically for the purpose of allowing
                   comprehensive rehabilitation of the property, and these
                   households had been temporarily relocated to other
                   buildings in that development pending the completion of

                           Page 31                                99-CH-201-1801
Chapter 5


                     rehabilitation. The same is true of the units rehabilitated at
                     2822 South Calumet, in the Prairie Courts community. This
                     building has been targeted by the Relocation Department as
                     a relocation resource for families moving out of buildings at
                     the Robert Taylor Homes, and documentation is being
                     processed by the Relocation Department.

                     On October 13, 1998, the Authority restructured its major
                     departments and now both Housing Management and the
                     Modernization division report to the Assistant Executive
                     Director of Operations. This change will help to ensure a
                     coordination between Force Account, Development
                     Managers and Occupancy.        New procedures will be
                     completed by March 1999.


                     The Authority’s planned action to revise its computer system
 OIG Evaluation of   should result in useful unit turnaround information for
 Auditee Comments    Authority management. However, the Authority needs to
                     ensure that units undergoing major rehabilitation under the
                     Modernization or Vacancy Programs are not included in the
                     calculation of unit turnaround time.

                     We do not agree that the punch list currently used for
                     rehabilitated units encompasses all requirements necessary
                     to ensure that the units meet Housing Quality Standards.
                     The punch list only rates the overall cleanliness and
                     appearance of the unit as good, fair, or poor. Rating a
                     unit’s cleanliness and appearance does not provide
                     assurance that the unit meets safety standards.

                     After receiving the Authority’s comments, we attempted to
                     verify when the rehabilitated units at Rockwell Gardens and
                     Prairie Court were occupied. The Authority did not have
                     documentation to show when the 73 units at Rockwell
                     Gardens were reoccupied subsequent to the rehabilitation.
                     A Force Account Labor Department Program Coordinator
                     said that the units were vacant four months after completion
                     of the rehabilitation work. Additionally, we obtained
                     information that the Prairie Courts rehabilitated units were
                     occupied; however, two of the three units were not
                     occupied until August 1998. We modified our draft finding
                     accordingly.




99-CH-201-1801              Page 32
                                                                   Chapter 5


                  The reorganization of the Office of Operations and
                  development of coordination procedures should ensure
                  timely occupancy of rehabilitated units. The Authority
                  needs to develop procedures for coordination between the
                  Force Account Labor Department, Occupancy Department
                  and the Development Managers.


Recommendations   We recommend that the Director of Public Housing, Illinois
                  State Office, assures that the Chicago Housing Authority:

                  5A.Implements an effective system for tracking of unit turn-
                        around time.

                  5B.    Develops procedures to verify that rehabilitated
                         units meet HUD’s Housing Quality Standards.

                  5C.    Develops coordination procedures between the
                         Force Account Labor Department, Development
                         Managers, and the Occupancy Department. The
                         procedures       should     ensure     units    are
                         repaired/rehabilitated on the basis of demand and
                         applicable personnel are aware of projected
                         completion dates so units can be promptly occupied.




                          Page 33                              99-CH-201-1801
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99-CH-201-1801                  Page 34
                                                                                      Chapter 6


   Funding for Maintenance and Modernization
The OIG review dated September 30, 1996 determined that the Authority had not developed a
financial plan for funding maintenance and modernization efforts. The purpose of the financial
plan was to find a way to spend maintenance and modernization funding for its intended purpose
and not on security. Also, the Authority had not targeted and linked up with appropriate
resources or closed out modernization programs that were over three years old. The review
found that the Authority had contracted to have an Authority-wide viability assessment completed
by December 31, 1996.

We recommended that HUD assure that the Authority: (1) develop a maintenance and
modernization financial plan that targeted and linked up with appropriate resources by December
2000; (2) use the viability assessment it planned to complete, to coordinate its modernization and
capital improvement programs with its 1996-1997 Comprehensive Grant Program plan; and (3)
close out all of the open modernization programs related to the Comprehensive Improvement
Assistance and Comprehensive Grant Programs that were over three years old.


                                     As of July 23, 1998, the Authority had partially
 Observations                        implemented two of the three recommendations. The
                                     Authority reduced the amount of maintenance and
                                     modernization funding spent on security and targeted and
                                     linked up with appropriate resources. But, it had not
                                     developed a financial plan. The Authority completed its
                                     viability assessment and submitted it to HUD for approval
                                     on May 18, 1998. However, it has not used the assessment
                                     to coordinate its modernization and capital improvement
                                     programs. The Authority fully implemented the remaining
                                     recommendation to expend grants that were over three
                                     years old.

                                     The Authority established an informal committee to find
 A Financial Plan Was Not            ways to reduce the amount of maintenance and
 Developed                           modernization funding spent on security. Participants in the
                                     committee included staff from the Modernization,
                                     Maintenance, Security, Housing Management, and
                                     Community Relations and Involvement Departments.

                                     The Authority achieved its objective to reduce the amount
                                     of funding spent on security. Our previous review showed
                                     the Authority spent $58,107,000 of its maintenance and
                                     modernization funding on security. That amount has been
                                     reduced by $35,400,000. The 1998 budget plans to use


                                              Page 35                              99-CH-201-1801
Chapter 6


                          $25,500,000 of maintenance and modernization funding on
                          security.

                          Where 48 percent of Comprehensive Grant funds were
                          spent on security in 1996, 20 percent was budgeted for
                          1998. As of July 31 1998, the Authority’s expenditure rate
                          for security will result in a security budget overrun if
                          continued. The Authority has taken steps to reduce the rate
                          of expenditure.     The Finance Department’s Special
                          Programs Accounting Manager said Comprehensive Grant
                          funds will not be used for any cost overruns should they
                          occur.

                          Although the Authority reduced the amount spent on
                          security, it did not document the actions it took to reduce
                          costs in a financial plan. Since the reduction of the amount
                          of maintenance and modernization funds used for security is
                          a continuing goal, we believe a written financial plan is
                          necessary to ensure there is continuity to actions that have
                          been taken and that the actions represent sound decisions
                          for the Authority’s overall security, maintenance and
                          modernization programs.

                          The Authority has begun to target and link up with
 The Authority Has        appropriate resources for funding maintenance and
 Targeted And Linked Up   modernization activities. The target date for completion of
 With Resources           this action is December 2000.

                          For example, on June 13, 1998, the City of Chicago
                          Mayor’s Office issued a press release announcing $1.4
                          million of beautification and site improvements to Hilliard
                          and Ickes Homes. The site improvements represented the
                          combined efforts of the City, the Authority and private-
                          sector contributors (Peoples Energy Corporation and
                          Dominick’s Finer Food Incorporated). The City spent
                          $951,500, the Authority $410,000 and the private sector
                          contributed $85,000.

                          On June 30, 1998, the Authority submitted an application to
                          the Illinois Department of Natural Resources for an open
                          space land acquisition and development grant for a Lathrop
                          Riverwalk. The Authority requested $200,000 for the
                          development of the edge of the North Branch of the
                          Chicago River at the Authority’s Julia Lathrop Homes.


99-CH-201-1801                   Page 36
                                                                            Chapter 6


                         A viability assessment was completed and submitted to HUD
A Viability Assessment   for approval on May 18, 1998 (see Chapter 2). The Authority
Was Completed            is awaiting final approval of the plan by HUD to incorporate
                         the assessments in the modernization and capital improvement
                         programs and to coordinate the modernization and capital
                         improvement programs with its 1998-1999 Comprehensive
                         Grant Program plan. Before HUD approves the Authority’s
                         viability assessment, a marketing study assessing the impact
                         of unit demolition on affordable housing in the area needs to
                         be completed. The marketing study is scheduled to be
                         completed in the Spring of 1999. The Director of
                         Modernization is responsible for ensuring that the process is
                         completed upon HUD’s approval of the viability assessment.

                         In our previous report we identified six modernization and
Old Modernization
                         comprehensive grant programs that were over three years
Program Funds Were
                         old with unexpended grant funds. As of August 21, 1998,
Expended
                         the Authority had spent the grant funds for the six
                         programs.


                         Excerpts from the Authority’s comments follow. Appendix A,
Auditee Comments         page 146, contains the complete text of the comments.

                         The Authority is not convinced that OIG's recommendation
                         that the Chicago Housing Authority develop and prepare an
                         additional written financial plan is necessary, given the fact
                         that the Authority has several large documents that discuss
                         financial planning.

                         OIG’s recommendation to develop a financial plan to ensure
                         maintenance and modernization funds are effectively spent
                         appears superfluous to the existing federal requirements of
                         the Comprehensive Grant Program. What exactly is missing
                         from the documents listed above that should be contained in
                         the proposed financial plan?

                         The observation that the Authority did not document the
                         actions taken to reduce the amount of money spent on
                         security is not accurate. The 1998 Comprehensive Grant
                         Program Annual Strategy Statement reads: "While public
                         safety and security will continue to be a priority, changing
                         times call for a re-examination of our approach to this
                         crucial issue. Over the past several years, increased use of
                         Comprehensive Grant Program funding for public safety and

                                 Page 37                                99-CH-201-1801
Chapter 6


                     other management improvements, resulting in decreased
                     availability of funding for physical improvements to the
                     Authority's dwelling structures and grounds, has led to
                     severe neglect and deterioration of our communities. In
                     many cases, dwelling structures, even those located in
                     otherwise viable communities, have now deteriorated well
                     beyond the point of economical repair. We must now meet
                     the challenge of beginning to appropriately use
                     Comprehensive Grant Program funds to focus on key areas,
                     which have a significant impact on the quality of life for our
                     residents. Therefore, the 1998 submission aggressively
                     increases funding for dwelling structures and resident
                     initiatives, and moves the Authority's Comprehensive Grant
                     Program budget toward compliance with the regulatory
                     guidelines for expenditures of these funds."

                     The focus of our observation was the development of a
 OIG Evaluation of   financial plan that documented where and how security
 Auditee Comments    funds were reduced. We believe this is important to ensure
                     there is continuity to actions that have been taken and that
                     the actions represent sound decisions for the Authority’s
                     programs.     We agree that the Comprehensive Grant
                     Program budget showed that the total amount allocated for
                     security was reduced; however, it did not document the
                     individual programs from which the funds were reduced,
                     nor did any of the Authority’s other financial planning
                     documents. In order to adequately evaluate the effect of the
                     reduction on the Authority’s security programs, the
                     Authority needs to be able to identify the source of the
                     reductions. We revised our recommendation to make it
                     more clear.


                     The Modernization Division concurs with the
 Auditee Comments    recommendation to incorporate the viability assessment into
                     capital improvement programs. In fact, this has already
                     been done. The 1998 Comprehensive Grant Program
                     Annual Submission included the complete draft viability
                     assessment as an appendix.

                     Comprehensive Improvement Assistance Program 915 was
                     closed out, with all of the remaining funds drawn down
                     from the Line of Credit Control System on August 21,
                     1998. It is unknown what the explanation about Gautreaux
                     and Habitat delays is based on.

99-CH-201-1801              Page 38
                                                                         Chapter 6



                    The Authority incorporated the draft viability assessment into
OIG Evaluation of   its 1998 Comprehensive Grant Program annual submission.
Auditee Comments    The Authority needs to incorporate the viability assessment
                    that is approved by HUD into its modernization and capital
                    improvement programs.

                    Based on the documentation provided by the Authority with its
                    comments, we revised the Chapter to show that all Grants were
                    closed out.



Recommendations     We recommend that the Director of Public Housing, Illinois
                    State, Office assures that the Chicago Housing Authority:

                    6A.    Documents the actions it has taken to reduce security
                           costs in a financial plan to ensure there is continuity to
                           the actions and that the actions represent sound
                           decisions for the Authority’s programs.

                    6B.    Upon HUD’s approval of the viability assessment,
                           incorporates the assessments into its modernization
                           and capital improvement programs and coordinates
                           the modernization and capital improvement
                           programs with the 1998-1999 Comprehensive Grant
                           Program plan.




                            Page 39                                  99-CH-201-1801
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99-CH-201-1801                  Page 40
                                                                                         Chapter 7


                              Annual Inspections
The OIG review dated September 30, 1996 determined that the Chicago Housing Authority had:
adopted City sanitary codes and incorporated the codes into HUD’s Housing Quality Standards
format; revised its inspection form; trained its staff on unit inspections and work order priorities;
developed and implemented procedures for inspecting one-tenth of units at each development on
a monthly basis; and developed and revised reports to track and monitor unit inspections,
inspection work orders, and time to complete the work. The Authority had not developed
comprehensive inspection procedures or implemented a job order contracting system.
Additionally, we determined that annual unit inspections were not always effective and work
orders were not initiated for all necessary repairs identified by the inspections.

As a result, we recommended that HUD assure the Authority: (1) conduct quality control reviews
of inspections to ensure the inspections are accurately conducted and inspection forms are
properly completed; (2) develop thorough, comprehensive inspection procedures and include the
new procedures in the Maintenance Manual and Housing Quality Standards Training Manual; (3)
evaluate each development to determine if all annual inspection forms completed after April 1,
1996 were sent to the Customer Service Center to initiate work orders; (4) implement controls
that ensured work orders were written to address deficiencies identified by inspections; and (5)
identify the funds and implement a new timetable for initiating a job order contracting system.


                                      As of September 11, 1998, the Authority had partially
 Observations                         implemented one of the five recommendations. The
                                      Authority developed policies and procedures for quality
                                      control audits of development files.           However, the
                                      Authority did not develop policies and procedures for
                                      conducting quality control reinspections. The Authority did
                                      not: develop comprehensive inspection procedures;
                                      implement controls that ensured work orders were written
                                      to address inspection deficiencies; and identify the funds and
                                      implement a new timetable for initiating a job order
                                      contracting system.

                                      In March 1998, the Authority developed and implemented
 Quality Control Audits of            policies and procedures for quality control audits of
 Development Files Were               development files. The procedures include steps to ensure
 Performed                            Housing Quality Standards inspection forms are properly
                                      completed. The Customer Service Center began performing
                                      quality control audits of development files in March 1998. As
                                      of August 18, 1998, the Customer Service Center completed
                                      92 file audits.
                                      We reviewed the Customer Service Center’s audit reports for
                                      four developments. We determined that the audits were

                                               Page 41                                99-CH-201-1801
Chapter 7


                             conducted according to the Authority’s procedures, and
                             follow-up audits were conducted when necessary. The audits
                             provide the Authority with assurance that inspection forms are
                             properly completed.

                             The Authority did not develop thorough and comprehensive
 Comprehensive Inspection    procedures for Housing Quality Standards inspections or
 Procedures Were Not         include the procedures in their Maintenance and Training
 Developed                   Manuals. The training manual used by the Authority was
                             prepared by the National Center for Housing Management.
                             The National Center used this manual as part of a Housing
                             Quality Standards training course attended by Authority
                             employees. The manual was course specific and did not
                             include Authority operating procedures.

                             Between August and October 1997, the Authority issued
                             three memoranda to its staff outlining procedures for annual
                             building inspections, file maintenance for Housing Quality
                             Standards inspections, distribution of inspection reports,
                             and amendments to inspection forms. The staff used these
                             procedures to conduct annual and building inspections.
                             However, these memoranda are not comprehensive. The
                             memoranda did not address all the procedures essential to
                             conducting effective Housing Quality Standards inspections.
                             For example, the memos did not address: when inspections
                             should be performed (i.e. concurrent with annual
                             recertifications); who is responsible for performing the
                             inspections; when work orders should be written; and the
                             reinspection of units for quality control.

                             The Authority did not develop or implement policies and
 Quality Control             procedures to conduct quality control reviews of Housing
 Reinspections Were Not      Quality Standards inspections to ensure inspection accuracy.
 Performed                   The Customer Service Center Manager said the staff who
                             performed the file audits were unable to perform unit
                             reinspections because the job descriptions approved by the
                             union did not include the requirement to perform reinspections.
                             However, the Authority had not pursued any actions to get
                             reinspections added to the job descriptions. As of September
                             11, 1998, the Authority did not have any plans in place to
                             address the reinspection of units to ensure inspection accuracy.
                             Quality control inspections are important to provide assurance
                             that inspections are properly conducted and that work orders
                             are initiated when necessary.


 Work Orders Were Not
99-CH-201-1801
  Generated For Needed               Page 42
 Repairs Identified During
 Inspection
                                                                                 Chapter 7


                           The Authority did not ensure work orders were initiated for
                           needed repairs identified during unit inspections. We selected a
                           sample of nine units from three developments to determine if
                           work orders were initiated for needed repairs. We reviewed all
                           17 inspections completed after April 1, 1996 on the nine units.
                           Nine of the 17 inspections reported work needed to be
                           accomplished. However, only two of the inspections had work
                           orders written to address the needed repair items. We
                           identified 18 items requiring repair for which work orders were
                           not written. For example, work orders were not generated for
                           a leak under a kitchen sink, a bedroom ceiling leak, and a roach
                           infestation. The Authority has not developed a comprehensive
                           policy or established controls to ensure work orders are written
                           for all problems reported during the Housing Quality Standards
                           inspections.

 A Job Order Contracting   The Authority did not establish a job order contracting system.
 System Was Not            A job order contracting system establishes a unit price book
 Established               that identifies the direct labor, equipment, and material costs by
                           construction task. The system allows the Authority to establish
                           the price of a contract before it is advertised and; thus, bypass
                           the Request For Proposals process. As a result, the time
                           required to procure services is reduced.

                           According to the Director of Modernization, a job order
                           contracting system was not established because the Authority
                           did not have funds available to hire a consultant. However, in
                           the 1998 Comprehensive Grant budget approved on August
                           28, 1998, $1 million was allocated to hire a consultant to assist
                           the Authority in the development of a job order contracting
                           system. The Director plans to issue a request for proposal for a
                           consultant by November 30, 1998.


                           Excerpts from the Authority’s comments follow. Appendix A,
Auditee Comments           page 159, contains the complete text of the comments.

                           While HUD’s recommendation to implement a Job Order
                           Contracting System is sound, I am unclear as to why this
                           recommendation is included in the chapter on Annual
                           Inspections.
                           One of the areas that were sited as a deficiency was the lack
                           of quality control re-inspections. While the technical
                           wording of the OIG report is accurate, there are no formal
                           policies and procedures in place for the re-inspection of

                                   Page 43                                   99-CH-201-1801
Chapter 7


                     Annual inspections, this suggests no re-inspections were
                     completed for that reporting period, and that is a false
                     assumption.

                     Quality Control re-inspections were completed by a team of
                     four administrative staff. Re-inspections were conducted in
                     the following developments: Cabrini-Green Homes;
                     Stateway Gardens; Judge Green Senior Units; Trumbull-
                     Lowden Homes, and ABLA Homes. A ten percent sample
                     was taken of the various unit counts to give a statistical
                     sampling of the developments. As problems were identified,
                     corrective steps were identified, and relayed to the
                     development staff.

                     To formalize this procedure for the future, and to comply
                     with the suggestions of the OIG, we must develop written
                     re-inspection policies, and implement them as soon as
                     possible.


                     The Job Order Contracting System recommendation is
 OIG Evaluation of   included in the Chapter on Annual Inspections because it was
 Auditee Comments    listed under component five, Annual Inspection of
                     Units/Systems, in the Authority’s June 21, 1996 draft
                     Memorandum of Agreement, which was the basis for our
                     previous review.

                     The Authority agreed it did not have policies or procedures for
                     quality control of annual inspections; and that it needed to
                     develop procedures. The Authority indicated that it performed
                     some inspections at five of its developments. We requested
                     documentation to support the inspections; however, the
                     Authority did not provide any. We did not find any
                     documentation during our review to support that quality
                     inspections were conducted. The Authority needs to develop
                     and implement reinspection policies and procedures.

                     The Authority did not provide comments addressing the fact
                     that comprehensive inspection procedures were not developed
                     and that work orders were not generated for needed repairs.



 Recommendations     We recommend that the Director of Public Housing, Illinois
                     State Office, assures that the Chicago Housing Authority:


99-CH-201-1801               Page 44
                                               Chapter 7


7A.   Develops thorough and comprehensive procedures to
      use when performing Housing Quality Standards
      inspections.

7B.   Develops and implements policies and procedures to
      conduct quality control reviews of Housing Quality
      Standards inspections.

7C.   Establishes controls and procedures that ensure work
      orders are generated for deficient items identified
      during Housing Quality Standards inspections.

7D.   Expeditiously implements a job order contracting
      system.




      Page 45                              99-CH-201-1801
Chapter 7




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99-CH-201-1801                  Page 46
                                                                                    Chapter 8


                Housing Management Functions
The OIG review dated September 30, 1996 determined that the Authority did not have effective
controls over its housing management functions and that it needed to decentralize its decision
making. At the time of our previous review, the Authority was in the process of implementing
corrective actions.

To ensure the Authority improved its housing management functions, we recommended that the
Authority should: (1) implement a development-based resource management system, and develop
uniform field-based policies and procedures and a uniform property management reporting
process; (2) improve communications and internal reporting between the site managers and the
Central Office, and create site-based management plans for each development; (3) identify all
major housing functions to assess cost efficiency and effectiveness; (4) continue to identify
opportunities for delegating management activities; and (5) determine the effectiveness of
delegating management responsibilities to the developments.


                                    The Authority fully implemented two of the five
 Observations                       recommendations from our prior audit report and partially
                                    implemented one recommendation.         The Authority:
                                    implemented development-based resource management,
                                    developed uniform field-based policies and procedures,
                                    developed a uniform property management reporting
                                    process, and continued to identify opportunities to
                                    decentralize management activities.      The Authority
                                    improved communications and internal reporting between
                                    site managers and the Central Office; however, it did not
                                    implement site-based management plans for its
                                    developments.

                                    The Authority did not identify the major housing functions,
                                    and it did not review the effectiveness of actions taken to
                                    delegate responsibilities to the developments.

                                    Our previous review determined the Authority’s
 The Authority                      development-based resource management strategy included
 Implemented                        plans to contract with a consulting firm to perform a skills
 Development-Based                  assessment of the Authority’s property management staff,
 Resource Management                implement a new computer system, and train its staff on the
                                    development-based budget process.

                                    The Authority contracted in late 1996 with a consultant to
                                    perform an assessment of its property management staff.
                                    The consultant’s report was issued on December 27, 1996.

                                            Page 47                              99-CH-201-1801
Chapter 8


                           The report recommended that the Authority develop a
                           training program to cover topics such as computer program
                           skills, developing high performance teams, and effective
                           management skills.

                           We verified that the Authority was providing training
                           courses in the areas recommended by the consultant. For
                           example, in 1997 and 1998, the Authority’s training courses
                           included Performance Management, Effective Team
                           Building, Leadership, and various computer software
                           courses.

                           The Authority’s development-based resource management
                           strategy included implementation of a new integrated
                           management information system purchased from Creative
                           Computer Solutions.       The integrated system includes
                           modules for: (1) tenant accounting, (2) purchasing, (3)
                           general ledger, (4) fixed assets, (5) bank reconciliation, (6)
                           inventory control, (7) housing eligibility, (8) accounts
                           payable, and (9) maintenance work orders. We reviewed
                           reports generated by the new system to determine if the
                           modules were functioning and if the reports were useful.
                           We believe the reports generated by the system provide
                           useful information to the Authority’s management and
                           HUD. However, the tenant accounting, housing eligibility,
                           work orders, and fixed assets modules do not properly
                           interface because they are based on older versions of
                           software (see Chapter 13).

                           The Authority trained its staff on the property-based
                           budgeting system during 1997. The training goal was met
                           and the Authority completed a property-based budget for
                           Fiscal Year 1997 (see Chapter 12).

                           As part of the Authority’s reorganization of the Housing
 The Authority Developed   Management Division, policies and procedures were
 Uniform Field-Based       reviewed and revised. Our review of selected policies and
 Policies And Procedures   procedures determined that the Authority needs to further
                           revise its procedures relating to work orders (see Chapter
                           3), vacancy reduction/unit turnaround (see Chapter 5),
                           annual inspections (see Chapter 7), admissions and evictions
                           (see Chapter 9), rent collections (see Chapter 10), and asset
                           management (see Chapter 14).




99-CH-201-1801                    Page 48
                                                                            Chapter 8


                           The Authority implemented a new property management
The Authority Developed    reporting system. Under the new system, information is
A Uniform Property         submitted by the developments to the Central Office using
Management Reporting       the monthly Authority Management Report. The
Process                    information reported by the developments includes
                           budgeted versus actual operating expenses, available units,
                           vacancies, rents collected, work orders, Housing Quality
                           Standards inspections, recertifications, code violations and
                           move-ins/move-outs. The information is reviewed by staff
                           in the Housing Management Division and the Office of
                           Management Analysis and Planning to evaluate the
                           performance of the housing developments.

                           Both Regional Property Managers and one of two Housing
                           Managers we interviewed said the Authority Management
                           Report process provided useful information for managing
                           their developments. The other Housing Manager said
                           although the information was useful at the development
                           level, the reporting process was an unnecessary
                           micromanagement tool. We believe the reporting process
                           serves as a useful tool to improve management and
                           coordination.

                           The Authority reorganized its Housing Management
The Authority Identified   Division in May 1997. Under the reorganization, the
Opportunities To           Director of Housing Management delegated the following
Decentralize Management    activities to Housing Managers: (1) annual inspections, (2)
Activities                 supervising maintenance staff, and (3) processing tenant
                           recertifications. Additionally, the authority to approve
                           purchase requisitions was delegated to Housing Managers
                           for purchases up to $3,000; to Property Managers for
                           purchases up to $10,000; and to Regional Property
                           Managers for purchases up to $25,000. The Authority also
                           implemented a property-based budgeting system. The
                           system gives each Housing Manager control over his/her
                           development’s funds. We believe the Authority has made
                           significant progress in decentralizing its housing
                           management functions.

                           The Authority hired a consultant to recommend strategies
                           for reducing its overhead costs. The consultant issued a
                           discussion paper on May 4, 1998 that contained
                           recommendations to further decentralize housing
                           management functions.      As of September 1998, the
                           Authority had not acted upon the consultant’s

                                   Page 49                              99-CH-201-1801
Chapter 8


                          recommendations. The Authority needs to assess the
                          consultant’s recommendations and implement those that will
                          reduce overhead costs and further decentralize management.

                          The reorganization of the Housing Management Division
 Communications Between   improved communications between site managers and the
 Site Managers And the    Central Office. The Director of Housing Management holds
 Central Office Have      bi-weekly meetings with the Regional Property Managers
 Improved                 and quarterly meetings with all Housing Managers.
                          Additionally, the Regional Managers hold weekly meetings
                          with their Housing Managers and there is constant verbal
                          and written communication between all managers. The
                          Regional Property Managers and both Housing Managers
                          we interviewed said there was good communication
                          between the Housing Management Division and the Central
                          Office. They believed the process provided them with
                          timely information to perform their jobs.

                          Each of the Authority’s Housing Managers developed a
 Site-Based Management    site-based management plan for their development. The
 Plans Were Developed     plans were developed as part of the Registered Housing
 But Not Implemented      Manager certification process. We reviewed plans for five
                          developments and found that each plan contained general
                          information about the development it was based on, and
                          identified problem areas and a corrective action plan.
                          However, the Housing Management Division did not
                          implement the site-based management plans or establish a
                          date for their implementation. We believe the site-based
                          management plans need to be implemented since they are
                          an important tool that can be used to measure performance
                          and track progress for each housing development.

                          The Authority’s Memorandum of Agreement with HUD
 The Authority Did Not    required the Authority to identify all existing major housing
 Identify Major Housing   functions so they could evaluate the effectiveness and
 Functions                efficiency of the functions. At the time of our last review,
                          the Authority had identified six areas related to the
                          maintenance housing function. However, the Authority had
                          not identified other functions such as occupancy,
                          accounting, security, and redevelopment.

                          The Director of Housing Management said the Authority
                          identified additional major housing functions during the
                          reorganization of the Housing Management Division.
                          However, the Authority could not provide any

99-CH-201-1801                   Page 50
                                                                                 Chapter 8


                           documentation to support what the additional functions
                           were or that they had been evaluated for effectiveness and
                           efficiency. As a result, HUD lacks assurance that the
                           Authority has assessed the cost effectiveness and efficiency
                           of its housing management functions.

                           The Authority did not review the results of actions taken to
 The Authority Did Not     delegate responsibilities to the developments. The Director
 Review The Results Of     of Housing Management believed insufficient time had
 Delegating                elapsed since the reorganization of the Authority’s Housing
 Responsibilities To The   Management Division. The Director said the reorganization
 Developments              was not fully implemented until November 1997. The Director
                           believed a review of the delegation of responsibilities would not
                           be useful until the reorganization has been in effect for at least
                           one year. We agree with the Director’s conclusion to wait for
                           one year after the reorganization. The Authority should review
                           its delegation decisions beginning in December 1998.


                           Excerpts from the Authority’s comments follow. Appendix A,
Auditee Comments           page 177, contains the complete text of the comments.

                           The      Authority    has    reviewed     the    consultant's
                           recommendations and shall implement recommendations
                           that are believed by the Authority to reduce overhead costs
                           and further decentralize management. Because of the
                           importance of site-based management plans, the Authority is
                           continuing to review the process to ensure all Authority
                           departments are properly coordinated. This includes the
                           Authority's centralized computer system. The Authority has
                           identified the major housing functions and shall complete an
                           evaluation of each function's efficiency and effectiveness.
                           The Authority shall complete the review of the results of
                           actions taken to delegate responsibilities to the
                           developments.


                           The actions the Authority plans to take should correct the
 OIG Evaluation of         problems presented in this Chapter if the Authority also
 Auditee Comments          implements the site-based management plans prepared by its
                           development managers.


 Recommendations           We recommend that the Director of Public Housing, Illinois
                           State Office, assures that the Chicago Housing Authority:


                                   Page 51                                   99-CH-201-1801
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                 8A.Assesses the recommendations in the consultant’s May
                       4, 1998 discussion paper and implements those that
                       will reduce overhead costs and decentralize
                       management.

                 8B.   Implements site-based management plans for each of
                       its developments.

                 8C.   Completes the identification of major housing
                       functions in order to evaluate the functions’ cost
                       effectiveness and efficiency.

                 8D.   Reviews the results of actions taken to delegate
                       responsibilities to the developments.




99-CH-201-1801          Page 52
                                                                                          Chapter 9


                       Admissions and Evictions
The OIG review dated September 30, 1996 determined that the Authority did not admit and evict
tenants in a consistent manner to ensure problematic tenants were not allowed into housing or
were promptly removed. The Authority did not have an adequate written policy, use standard
procedures, or adequately communicate information to development managers.

As a result, we recommended that the Authority: (1) fill its home visit inspector positions to
ensure home visits were completed as part of the screening process; (2) develop procedures to
ensure all applicants are screened using revised screening procedures the Authority had
developed; (3) coordinate efforts with its legal department to provide a consistent application of
the Gautreaux decree for developing and using waiting lists; (4) develop procedures to coordinate
on potential evictions and the need for social services; (5) assure its tenant lease contained
provisions required by HUD regarding certain conditions for eviction when a resident’s behavior
interferes with the rights of other residents, and used the lease; (6) complete lease training for all
residents to ensure they understand the lease; (7) make the new tenant handbook available to all
residents when they recertify their leases; and (8) develop a site-based resident orientation manual
and implement a site-based resident orientation process.


                                       The Authority took actions that resolved five of the eight
 Observations                          recommendations from our prior review. Specifically, the
                                       Authority: (1) expeditiously filled its home visit inspector
                                       positions; (2) developed procedures that ensured all
                                       applicants were screened before being placed in units; (3)
                                       coordinated efforts with its legal department to provide a
                                       consistent application of the Gautreaux decree; (4)
                                       completed lease training for all residents; and (5) made the
                                       new tenant handbook available to all residents when they
                                       recertified their leases.

                                       The Authority did not develop procedures to coordinate
                                       potential evictions and the need for social services. Also,
                                       the Authority’s resident lease did not contain provisions
                                       required by HUD. Further, the Authority did not develop a
                                       site-based resident orientation manual and implement a site-
                                       based resident orientation process.

                                       Our previous review determined that the Authority had
 Home Visit Inspectors                 implemented housekeeping inspections as a screening tool
 Were Expeditiously Hired              to ensure that potential new residents properly cared for
 Not Effective                         their residences. The initial housekeeping inspections were
                                       performed under contract. At the time of our previous
                                       review, the Authority’s home visit contract was expiring.

                                                Page 53                               99-CH-201-1801
Chapter 9


                          Therefore, the Authority needed to either extend the
                          contract or hire its own home visit inspectors.    In
                          September and October 1996, the Authority hired three
                          Home Visit Inspectors.

                          The Authority developed screening procedures that ensured
 Procedures Were          all applicants were screened before being placed in a unit.
 Developed To Ensure      The new screening procedures required screening to be
 Appropriate Screening    performed close to the time of physical occupancy. We
                          randomly selected two resident files and found that both
                          residents were screened within two months before being
                          placed in housing. We believe the Authority’s new
                          screening procedures will improve the quality of its future
                          tenants, because the admission decisions are based on
                          current credit and criminal information.

                          The Authority coordinated efforts between its Occupancy
 Coordination Efforts
                          and Legal Departments to ensure consistent application of
 Existed Regarding The
                          the Gautreaux decree in managing its waiting lists. In the
 Gautreaux Decrees’
                          past, because of inconsistent application of the decree,
 Requirements
                          persons were able to indefinitely remain on top of the
                          Authority’s waiting list while refusing to accept housing
                          units. The Occupancy Department developed guidelines
                          based on the Legal Department’s interpretations of the
                          Gautreaux requirements. We determined the guidelines
                          were reflected in the Authority’s computerized waiting lists.

                          Under the new guidelines, an applicant at the top of the
                          Authority’s overall waiting list is offered available housing.
                          If the offer is refused, the applicant must declare a
                          preference for a particular housing development. If there
                          are no units available at the selected development, the
                          applicant is placed on a site-specific waiting list for the
                          housing development of choice.

                          Our prior review determined that the Authority approved a
 All Residents Received   new resident lease but did not train its residents on the lease
 Lease Training           requirements. Since that review, lease training has been
                          provided at the time of initial lease signing for new residents
                          and at recertification for in-place residents. The training
                          was provided by Development Managers using a standard
                          outline prepared by the Office of General Counsel that
                          covered the various sections of the approved lease. We
                          interviewed four Development Managers and each said they
                          used the outline to explain the lease to all new and

99-CH-201-1801                    Page 54
                                                                               Chapter 9


                          recertified residents. We interviewed five residents and
                          each confirmed that they had received lease training. We
                          believe lease training is necessary to ensure residents are
                          aware of their responsibilities and obligations.

                          Our prior review determined that the Authority was
New Tenant Handbook       planning to distribute its new tenant handbook to new
Was Provided To All       residents but not to in-place residents. We recommended
Residents                 that the handbook be provided to all residents to ensure that
                          all residents were aware of their rights, privileges, and
                          responsibilities. All four Development Managers that we
                          interviewed said they provided the new tenant handbook to
                          all new and recertified residents. We interviewed five
                          tenants. All five said they were given a copy of the tenant
                          handbook when they signed their lease.

                          The Authority did not develop procedures for Development
Evictions Were Not        Managers and the Social Services Division to coordinate
Coordinated Between       potential evictions and the need for social services. The
Development Managers      Director of Housing Management and the Assistant
And The Social Services   Director of Operational Services said coordination
Division                  procedures were not developed due to other priorities.

                          All four Development Managers that we interviewed said
                          they only informally coordinated with the Social Services
                          Division regarding evictions when they believed it was
                          necessary. For example, the Development Managers said
                          they may contact the Social Services Division regarding a
                          potential eviction involving severe weather, a large number
                          of small children, or a handicapped individual. However,
                          without formal procedures, there is no assurance that all
                          residents receive fair and equitable treatment.

                          On December 5, 1996, the Authority revised its residential
Resident Lease Does Not   lease agreement. The revised lease did not contain a new
Reflect New HUD           provision required by HUD. Specifically, HUD Notice 96-
Provisions                27 states that housing authorities may bypass grievance
                          procedures for evictions involving any activity, not just
                          criminal activity, that threatens the health, safety, or right to
                          peaceful enjoyment of the premises by other tenants or
                          housing authority employees. The Authority’s new lease
                          does not provide for a waiver of grievance proceedings for
                          evictions involving non-criminal activity. As a result,
                          residents involved in non-criminal activity that interferes


                                  Page 55                                  99-CH-201-1801
Chapter 9


                          with rights of other residents or employees can not be
                          removed from public housing during the grievance process.

                          The Authority did not develop a site-based resident
 A Site-Based Resident    orientation manual, nor did it implement a site-based
 Orientation Manual And   resident orientation process. The Director of Housing
 Process Were Not         Management and the Assistant Director of Operational
 Established              Services said the orientation manual and related process
                          were not developed due to other priorities.

                          The site-based resident manual and orientation process are
                          necessary to ensure that residents are made aware of their
                          rights and responsibilities concerning matters unique to their
                          particular housing development.


                          Excerpts from the Authority’s comments follow. Appendix A,
Auditee Comments          page 177, contains the complete text of the comments.

                          The Authority is currently revising it's procedures to ensure
                          coordination between Development Managers and outside
                          social service agencies. The recommendation for revising
                          the resident lease is being reviewed by our Legal department
                          and if not precluded by law will be presented to the Chicago
                          Housing Authority executive staff. The revised site-based
                          resident orientation manual will be completed the first
                          quarter in Fiscal Year 99.


                          The actions the Authority plans to take should correct
 OIG Evaluation of        problems presented in this Chapter if the actions are followed
 Auditee Comments         through to completion.


 Recommendations          We recommend that the Director of Public Housing, Illinois
                          State Office, assures that the Chicago Housing Authority:

                          9A.Develops procedures for Development Managers and
                                the Social Services Division to coordinate on
                                potential evictions and the need for social services.

                          9B.    Revises its resident lease to provide for a waiver of
                                 grievance procedures for evictions involving any
                                 activity, not just criminal activity, that threatens the
                                 health, safety, or right to peaceful enjoyment of the

99-CH-201-1801                   Page 56
                                             Chapter 9


      premises by other tenants or housing authority
      employees.

9C.   Develops a site-based resident orientation manual
      and implements a site-based resident orientation
      process.




      Page 57                            99-CH-201-1801
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99-CH-201-1801                  Page 58
                                                                                        Chapter 10


                                 Rent Collections
The OIG review dated September 30, 1996 determined that the Authority’s uncollected rent
balance was consistently excessive. As a result, we recommended that HUD assure the Authority:
(1) continue to develop sources for orientation programs and financial services to assist its tenants
to meet the minimum monthly rent requirement, and (2) establish controls to ensure all
uncollectible accounts are referred each month to a collection agency.


                                      The Authority continued to develop sources for orientation
 Observations                         programs and financial services to assist its tenants to
                                      become more self-sufficient. The minimum rent was
                                      reduced from $25 to zero; therefore, the Authority no
                                      longer needed to refer tenants with zero income to public
                                      agencies for assistance in paying their rent. The Authority
                                      did not establish controls to ensure uncollectible accounts
                                      were referred each month to a collection agency.

                                      The Authority continued to coordinate with various service
 Programs Were                        agencies to conduct programs for its residents to become
 Conducted For Residents              more self-sufficient. Between July 1996 and April 1998, 46
 To Become More Self-                 courses were conducted. Under the Family Self-Sufficiency
 Sufficient                           Program, sessions were presented on Child Care Referrals,
                                      Education Referrals, Job Training, Job Placement, and Rent
                                      Disregard.      Social Services/Delegate Agencies also
                                      conducted workshops on home care, money management,
                                      interviewing skills/techniques, and relocating. Based on the
                                      number of sessions and the variety of subjects, we believe
                                      the Authority’s effort to increase tenant awareness of the
                                      tenants’ responsibilities was adequate.

                                      At the time of our last review, HUD required all tenants to
 The Authority’s Minimum              pay a minimum of $25 a month in rent. This caused the
 Rent Was Reduced To                  Authority to have to arrange assistance for approximately
 Zero                                 1,500 tenants who could not meet the minimum rent
                                      payment. On February 28, 1997, the Authority reduced its
                                      minimum rent from $25 to zero. The change was
                                      authorized by HUD Notice PIH 96-81 dated September 30,
                                      1996. As a result, the Authority no longer needed to refer
                                      tenants with zero income to public agencies for assistance in
                                      paying rent.

                                      The Authority did not refer delinquent tenants to its
 Delinquent Tenants Were              collection agency. The Tenant Accounting Department
 Not Referred To A
 Collection Agency                             Page 59                                99-CH-201-1801
Chapter 10


                         suspended referrals to the collection agency in April 1997
                         because the employee who was performing the function
                         transferred to another position within the Authority. A new
                         employee was hired in November 1997; however, as of July
                         15, 1998, no delinquent tenants were referred.

                         The Authority’s Tenant Accounting Manager said referrals
                         were not been made because the new employee needed to
                         be trained. However, we believe the Authority has been
                         negligent in not making referrals. We determined the
                         individual who is responsible to refer delinquent accounts
                         did not receive any formal training, and was merely
                         provided with information on the requirements necessary to
                         make referrals.

                         Between September 1996 and March 1997, the Authority
 The Collection Agency   referred a total of 59 cases to the collection agency.
 Made No Collection      However, the collection agency took no collection action on
 efforts                 any of the cases. A principal for the agency said the agency
                         took no action because it did not receive adequate
                         information to determine the validity of the amount owed or
                         to locate the individual. He said the agency did not contact
                         the Authority to express its concerns with the information
                         the Authority provided. Additionally, we determined that
                         the Authority did not follow up with the collection agency
                         to get the status on the cases the Authority referred. The
                         complete breakdown in communication between the
                         Authority and the collection agency, and lack of initiative
                         shown on the part of both resulted in a totally ineffective
                         collection program.


                         Excerpts from the Authority’s comments follow. Appendix A,
Auditee Comments
                         page 138, contains the complete text of the comments.

                         We concur with the observations and recommendations
                         included in the OIG report.         Although the Tenant
                         Accounting department was understaffed for a period
                         during 1997, an effort should have been made to reprioritize
                         responsibilities such that the collection efforts could
                         continue. Also, there is an obvious need to improve
                         communications between the Authority and its collection
                         agency. Therefore, the Tenant Accounting department will
                         take the following actions:


99-CH-201-1801                  Page 60
                                                                     Chapter 10


                    1.     Arrange a meeting with the collection agency to
                           determine the specific information that the agency
                           requires to perform its collection actions.

                    2.     Inform the CHA Property Managers of the specific
                           information that they will need to provide to Tenant
                           Accounting on a monthly basis.

                    3.     Provide a list of new tenants to be referred for
                           collection to the agency on a monthly basis.

                    4.     Follow up with the agency on a monthly basis to
                           receive the status of all tenants who have previously
                           been referred to the agency.

                    In the future when staffing shortages such as this occur, the
                    manager, assistant controller and controller will agree on
                    how to reprioritize responsibilities such that key tasks can
                    continue to be performed.


                    The actions the Authority plans to take should correct the
OIG Evaluation of   problems identified in this Chapter if the actions are fully
Auditee Comments    implemented and enforced.



Recommendations     We recommend that the Director of Public Housing, Illinois
                    State Office, assures that the Chicago Housing Authority:

                    10A.   Immediately takes steps and develops controls to
                           ensure all uncollectible accounts are referred each
                           month to a collection agency.

                    10B.   Establishes procedures to obtain the status of cases
                           referred to its collection agency and to evaluate the
                           performance of the agency. Replaces the agency if it
                           does not meet acceptable performance standards.




                            Page 61                               99-CH-201-1801
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99-CH-201-1801                  Page 62
                                                                                         Chapter 11


                    Procurement and Contracting
The OIG review dated September 30, 1996 reported the Authority did not have an effective
procurement process. As a result, we recommended that the Authority: (1) establish written
procedures outlining the emergency procurement process and incorporate the procedures in the
Maintenance Manual; (2) establish procedures and controls to verify that items purchased through
the open hardware accounts are for emergency purposes; (3) implement procedures to notify
reviewing officials of the terms of the open supply and service accounts’ purchase agreements; (4)
require its vendors to show discounts received on applicable invoices so the Authority has
assurance it is receiving the discounts to which it is entitled; (5) review its purchase agreements to
ensure they reflect the correct discounts; (6) assess its procurement process by September 30,
1997 to ensure the problems the planned Memorandum of Agreement strategies were created to
eliminate have been corrected or take action to make additional changes; and (7) develop
procedures to conduct a periodic analysis of its contracting process and initiate actions necessary
to improve the process.


                                       As of July 31, 1998, the Authority took actions that
 Observations                          resolved four of the seven recommendations from our
                                       previous report.      The Authority established written
                                       emergency procurement procedures and incorporated them
                                       in its Maintenance Manual; discontinued the use of open
                                       hardware accounts and established effective controls to use
                                       petty cash resources for emergency purchases; and ensured
                                       its annual requirements contracts contained the correct
                                       discounts.

                                       The Authority did not require its vendors to show discounts
                                       given on invoices; did not assess its procurement process to
                                       ensure its Memorandum of Agreement strategies had been
                                       addressed; and did not develop procedures to conduct
                                       periodic analyses of its contracting process.

                                       In addition to the problems that have not been corrected
                                       since our previous review, we determined the Authority did
                                       not always obtain competitive bids when required, and
                                       executed some contract amendments subsequent to their
                                       effective dates.

                                       The Authority established written procedures for acquiring
 The Authority Established
                                       materials to abate emergency conditions and included them
 Written Emergency
                                       in its Maintenance Manual. The procedures state that if
 Procurement Procedures
                                       materials are not available at the development’s stockroom
                                       or the warehouse, supplies or materials can be obtained

                                                Page 63                               99-CH-201-1801
Chapter 11


                          through the open purchase orders or “Open Hardware
                          Accounts” that were established with area hardware stores.

                          However, the Authority no longer uses the open purchase
                          orders or open hardware accounts to purchase materials for
                          emergency repairs, and the manual has not been changed to
                          reflect the new procedures. In lieu of the open purchase
                          orders or open hardware accounts, the Authority uses the
                          development’s petty cash funds to make emergency
                          purchases. We reviewed the petty cash procedures and
                          found they contain adequate controls and provide a
                          reasonable method to obtain emergency supplies. However,
                          to ensure maintenance personnel understand the procedures
                          and know they can be used for emergencies, the procedures
                          need to be included in the maintenance manual.

                          In order to determine whether the Authority received
 Vendors Did Not Show     discounts to which it was entitled, we reviewed invoices
 Discounts On Invoices    related to two annual requirements contracts.          Both
                          contracts properly disclosed the discount percentages
                          provided by the vendors. One of the contracts specified that
                          the Authority would receive a discount of 83 percent of the
                          vendor’s catalog list prices. The other contract specified
                          that the Authority would receive a discount of 62 percent of
                          the vendor’s catalog list prices. The Authority advised
                          reviewing officials of the terms of the contracts. However,
                          the contracts did not require the vendors to show the
                          applicable discounts on the invoices.

                          We determined the Authority received the vendor discounts
                          in accordance with the contracts with a few exceptions that
                          were immaterial. However, requiring the vendor to show
                          the discounts on the invoices is an important control that
                          provides assurance that personnel unfamiliar with the terms
                          of the contract will not overlook the discount.

                          The Authority hired a consultant to identify its Purchasing
 The Authority Hired A    and Contracts Department’s business processes and
 Consultant To Do A       requirements. The assessment was not done in response to
 Procurement Assessment   our prior audit recommendation and did not specifically
                          address the Memorandum of Agreement strategies.

                          The consultant’s review included interviews with Authority
                          personnel; reviews of reports, regulations, policies,
                          procedures, audits, files, goals, and performance objectives;

99-CH-201-1801                   Page 64
                                                                           Chapter 11


                           and on-site visits to Authority offices and the central
                           warehouse.

                           The consultant issued a report on March 6, 1998 that
                           contained recommendations to: (1) consolidate all
                           purchasing,     contracting,    contract    administration,
                           warehousing, and surplus property management activities
                           under one procurement department; (2) dispose of obsolete
                           stock; (3) conduct a customer satisfaction survey with its
                           vendors; (4) organize information in the computer system to
                           develop meaningful measures of what must be managed; (5)
                           require and support professional certification of the
                           Procurement and Warehouse staff; and (6) educate
                           Authority personnel about Procurement requirements. The
                           Deputy Executive Director of Finance and Administration
                           said the Authority is in the process of implementing the
                           consultant’s recommendations.

                           Although the consultant’s recommendations should assist
                           the Authority in improving its procurement function, we
                           could not determine to what extent specific Memorandum
                           of Agreement strategies were addressed. The Authority still
                           needs to assess its procurement process to ensure the
                           planned Memorandum of Agreement strategies were
                           corrected.

                           The Authority’s Procurement Manual did not contain
The Authority Did Not      procedures to perform a periodic analysis of its contracting
Develop Procedures To      process. The Authority’s Director of Purchasing and
Periodically Analyze Its   Contracts acknowledged that the Manual did not include the
Contracting Process        procedures. The Director said he was in the process of
                           revising the Manual to incorporate the review procedures
                           and planned to complete the revision by November or
                           December 1998. The Director prepared a checklist to be
                           used for periodically assessing the Authority’s procurement
                           process. This checklist will be used to ensure that
                           procurements are being executed in accordance with
                           applicable Federal laws, Presidential executive orders, and
                           HUD procurement handbooks. We reviewed the checklist
                           and found it to be very thorough. We believe the checklist
                           will be a good basis for a procurement assessment when
                           procedures for its use are implemented.

                           Although procedures had not been developed, the Authority
                           performed one review of the contracting process. In

                                   Page 65                              99-CH-201-1801
Chapter 11


                          December 1997, one of the Authority’s Purchasing
                          Managers performed a review of selected purchase orders
                          issued during November 1997.            The review found
                          deficiencies in eight of 39 purchase orders reviewed. The
                          deficiencies included lack of evidence of fair and reasonable
                          pricing (6 instances), lack of supporting documentation (1
                          instance), and lack of proper approval (1 instance).
                          However, there was no indication that any actions were
                          taken by the Authority to correct the problems. Written
                          procedures for periodic reviews are important to provide
                          assurance that reviews are done, address the correct areas,
                          and that corrective actions are taken when problems are
                          found.

                          We reviewed four contracts to assess whether the Authority
 The Authority Executed
                          properly contracted for goods and services. For two of the
 Contracts After The
                          four contracts, amendments to the initial contract were
 Effective Dates
                          signed by the Authority after the effective date of the
                          contract and after some work had been initiated. Also, for
                          one of the two contracts, there was no evidence that it had
                          been competitively bid. The other three contracts were
                          competitively bid.

                          Contract Number 8642 in the amount of $5,140,454 for
                          security services was amended effective January 5, 1997 in
                          the amount of $1,172,852; however, the contract
                          amendment was not executed by the Authority until
                          February 26, 1997, or 52 days after the effective date. The
                          contract was again amended effective May 1, 1997 for
                          $6,265,697. The second amendment was not executed by
                          the Authority until May 27, 1997, or 26 days after the
                          effective date.

                          Contract Number 8851 for legal services in the amount of
                          $200,000 was amended effective January 1, 1998, but was
                          not executed until April 6, 1998, 95 days after the effective
                          date. It is important for contracts to be executed before
                          work begins to clearly define the Authority’s rights and
                          obligations in the event of a disagreement or conflict with
                          the contractor.

                          There was no evidence to show that Contract Number 8851
                          was competitively bid. The Purchasing Manager said the
                          contract was competitively bid, but the support was
                          misplaced. HUD’s Office of General Counsel believed that

99-CH-201-1801                   Page 66
                                                                    Chapter 11


                   the proposed hourly rates were reasonable; however, HUD
                   and the Authority lack assurance that proper procurement
                   procedures were followed and that the most cost effective
                   price was paid for the services.


                   Excerpts from the Authority’s comments follow. Appendix A,
Auditee Comments   page 139, contains the complete text of the comments.

                   The maintenance manual does not currently reflect the new
                   upcoming procedures, especially in the area of emergency
                   purchases. Credit cards which will be issued to the
                   Authority’s various departments will become the standard
                   method of executing emergency purchases. This new
                   method of executing purchases will be outlined in the Credit
                   Card Standard Operating Procedures. The Credit Card will
                   take precedence over all previously established emergency
                   purchasing policies, and the Maintenance Manual will be
                   changed to refer readers to the Credit Card Standard
                   Operating Procedures for identification of the emergency
                   purchasing procedures.

                   The Purchasing and Contracts Department will incorporate
                   into all contracts and purchase orders instructions to the
                   vendors to show all discounts provided as a part of the
                   invoice presented. A sample copy of a proper invoice will
                   be provided to all vendors showing them the correct way to
                   reflect the discounts offered on their invoices.

                   The Authority is in the process of implementing the Beau
                   Geste Enterprises Inc. recommended changes that are
                   appropriate for the improvement of the overall Purchasing
                   and Contracts operations.

                   The Purchasing and Contracts Department developed a
                   detailed inspection checklist based on the directives
                   contained in the HUD Procurement Handbook 7460.8 Rev-
                   1, that will provide a periodic and proactive review and
                   assessment of all the Authority’s Purchasing and Contract
                   Operations. The inspection will be conducted on a quarterly
                   basis and is being incorporated as part of the rewrite of the
                   Authority’s procurement policies and procedures. It is fully
                   anticipated that this rewrite will be completed by December
                   31, 1998.


                           Page 67                               99-CH-201-1801
Chapter 11


                     The effective date of the contract is now reflected as the
                     date that the Contracting Officer signs the contract or
                     contract modification. All change orders or modifications
                     to contracts are now executed in full accordance with the
                     procurement laws and regulations identified in the 24 C.F.R.
                     85.36 and the HUD Procurement Handbook.


                     The actions the Authority has taken and planned should correct
 OIG Evaluation of   the problems identified in this Chapter, if the Authority
 Auditee Comments    properly implements and follows through on the actions.


 Recommendations     We recommend that the Director of Public Housing, Illinois
                     State Office, assures that the Chicago Housing Authority:

                     11A.   Modifies its Maintenance Manual to reflect the current
                            emergency procurement procedures.

                     11B.   Develops procedures to require its vendors to show
                            discounts received on applicable invoices so the
                            Authority has assurance it is receiving the discounts
                            to which it is entitled.

                     11C.   Analyzes the consultant’s March 6, 1998 report on
                            the Purchasing and Contracts Department and takes
                            appropriate actions.

                     11D.   Develops procedures to periodically conduct an
                            analysis of its contracting process and initiate actions
                            necessary to improve the process.

                     11E.   Develops procedures to ensure that contracts and
                            contract amendments are executed prior to the
                            effective dates.




99-CH-201-1801              Page 68
                                                                                       Chapter 12


                Accounting System and Controls
The OIG review dated September 30, 1996 determined that the Authority was implementing a
fully integrated Management Information System developed by Creative Computer Solutions
Systems. The Management Information System included seven accounting system modules. The
modules were: (1) tenant accounting, (2) purchasing, (3) general ledger, (4) fixed assets, (5) bank
reconciliation, (6) inventory control, and (7) accounts payable. Our review also found that the
Authority was planning to implement a site-based budgeting strategy.

We recommended that HUD closely follow the Authority’s progress and provide necessary
assistance to ensure the new accounting system was fully implemented by December 31, 1996,
and that written policies and procedures were issued as quickly as practical after each accounting
function was implemented. We also recommended that a site-based budget be implemented by
December 31, 1997.


                                      The Authority implemented the seven accounting modules
 Observations                         developed by Creative Computer Solutions Systems and
                                      established written policies and procedures. The Authority
                                      developed a site-based budget for the year ended December
                                      31, 1997. However, the Authority did not submit the
                                      budget to HUD in a timely manner.

                                      The Authority implemented the seven accounting modules
 Modules Were                         developed by Creative Computer Solutions Systems by the
 Implemented And                      December 31, 1996 target date; however, the tenant
 Procedures Written                   accounting and fixed assets modules do not properly
                                      interface with the other modules because they have outdated
                                      software (see Chapter 13). The lack of interface between
                                      the modules requires multiple posting of the same
                                      information and increases the likelihood of data input errors.
                                      We requested selected reports from each of the systems to
                                      ensure they were functioning and providing meaningful
                                      data. Each of the requested reports was promptly received
                                      and contained information that appeared to be useful for the
                                      Authority and HUD.

                                      The Authority also established written policies and
                                      procedures for the seven accounting modules. The policies
                                      and procedures provided appropriate guidance for using the
                                      modules. The policies and procedures were being followed
                                      by the respective Authority departments.



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                     The June 21, 1996 draft Memorandum of Agreement
 Site-Based Budget   between the Authority and HUD required the Authority to
 Strategies          implement strategies for a site-based budget by December
                     31, 1997. The Authority met the Memorandum of
                     Agreement target date for implementing strategies to
                     prepare a site-based budget, but did not submit the budget
                     to HUD timely.

                     Under the Authority’s site-based budget procedures, the
                     Budget Department submits a budget request to each of its
                     160 cost centers during June of the fiscal year preceding the
                     year for which the budget is being developed. At the time
                     of the request, the Budget Department advises each cost
                     center of the budget ceiling which has been established for
                     it. The managers of the cost centers prepare their budgets
                     based on data provided by the Budget Department. The
                     cost center budgets are supposed to be submitted to the
                     Authority’s Budget Department in July.

                     The Authority’s target dates for the budget call and
                     submission to the Budget Department allow the Authority
                     time to meet HUD’s requirement of having the budget sent
                     to HUD for approval, 90 days prior to the beginning of the
                     fiscal year. The Authority’s budget should be submitted to
                     HUD by October 1 of the year preceding the budget year.

                     The Authority’s Budget Department did not submit its 1998
                     budget to HUD by October 1, 1997. The budget was
                     received by HUD on May 6, 1998. The delay occurred
                     because the Budget Department did not have the authority
                     to enforce its deadlines, and did not use a method to adjust
                     budgets that exceeded allowable ceilings other than by
                     returning the budgets to the cost centers to be redone.

                     All 160 cost centers submitted their budgets late. Most
                     were 2 to 10 days late. However, 73 cost center budgets
                     were over 30 days late and two were 67 and 88 days late.
                     The Authority’s Budget Manager said cost center managers
                     did not consider the budget a top priority and he did not
                     have the authority to force them to comply with his
                     deadlines. Three of four cost center representatives who we
                     interviewed believed that other activities took priority over
                     the budget. The fourth cost center representative said the
                     budget preparation was delegated to staff members who
                     were not adequately trained on budget preparation.

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                                                                    Chapter 12


                   In addition to submitting the budgets late, the cost centers
                   did not limit their budget requests to the ceiling the Budget
                   Department had targeted for each cost center. The Budget
                   Department received all cost center budget submissions by
                   the end of October 1997; however, the total of the cost
                   center budgets exceeded the Authority’s authorized budget
                   ceiling.

                   At this point, the Budget Department became aware that the
                   Authority was going to deprogram units. Since the
                   deprogramming would reduce the Authority’s overall
                   budget, the Budget Department decided to wait until the
                   deprogramming action was completed before it requested
                   the cost centers to redo their budgets. The Authority
                   deprogrammed a total of 4,861 housing units in December
                   1997 and January 1998. The Budget Department returned
                   the budgets to the cost centers in February 1998 for
                   adjustment to eliminate the budget shortfall. However, the
                   aggregate budget request of the cost centers again exceeded
                   the Authority’s budget ceiling and the budgets were
                   returned to the cost centers again in April 1998 for further
                   adjustment. HUD received the budget on May 6, 1998.

                   In addition to establishing a target ceiling for each cost
                   center’s budget, the Authority needs to develop parameters
                   so that the Budget Department has a basis to adjust the
                   amounts of the budgets without returning them to the cost
                   centers when the cost centers fail to adhere to the targets.

                   When a budget is not submitted to HUD by the allowable
                   deadline, HUD provides the Authority a Letter of Intent
                   which allows continuation of funding based on the prior
                   year’s approved budget. Basing current year funding
                   decisions on the past year’s budget does not allow the
                   Authority to adequately plan for future operations and
                   potential changes to funding levels.


                   Excerpts from the Authority’s comments follow. Appendix A,
Auditee Comments   page 134, contains the complete text of the comments.

                   The Chicago Housing Authority will develop a policy and
                   accompanying procedures to insure that the Annual Budget
                   submission is completed and submitted to HUD in a timely
                   fashion (i.e., by October 1st of each fiscal year).

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                     The Chicago Housing Authority will develop a policy and
                     accompanying procedures to insure that the individual cost
                     centers prepare and submit their budgets to the budgeting
                     department in a timely fashion. The budgeting department
                     will be given the authority to prepare budgets for cost
                     centers who fail to comply with target budget dates and
                     targets.


                     The Authority’s planned actions should correct the late budget
 OIG Evaluation of   submission problem if the actions are followed through on and
 Auditee Comments    effectively implemented.



 Recommendations     We recommend that the Director of Public Housing, Illinois
                     State Office, assures that the Chicago Housing Authority:

                     12A.   Develops policies and procedures that establish
                            accountability for submitting budget information
                            timely.

                     12B.   Develops policies and procedures that allow the
                            Authority to unilaterally adjust cost center budgets
                            when the budgets fail to comply with target budgets.




99-CH-201-1801              Page 72
                                                                                        Chapter 13


                Management Information System
The OIG review dated September 30, 1996 determined that the Authority had purchased
computer software modules from Creative Computer Solutions in order to implement a fully
integrated Management Information System. The modules included: (1) tenant accounting, (2)
purchasing, (3) general ledger, (4) fixed assets, (5) bank reconciliation, (6) inventory control, (7)
housing eligibility, (8) accounts payable, and (9) maintenance work orders. The Authority was
also evaluating Creative Computer Solutions’ budget and payroll modules to determine if the
modules would meet the Authority’s needs.

We recommended that HUD assure the Authority: (1) evaluate the Creative Computer Solutions
budget and payroll modules and choose the modules to be used so the modules could be
implemented by December 31, 1996; (2) establish controls and procedures to complete the
implementation of its integrated management system by December 31, 1996, and to periodically
assess its information needs; (3) establish controls and procedures to ensure all applicable
employees received software training by December 31, 1996; and (4) complete the revisions of its
policies and procedures and implement all new security procedures by December 31, 1996.


                                      The Authority evaluated Creative Computer Solutions
 Observations                         payroll and budget modules and determined that the
                                      modules did not meet its needs. The Authority implemented
                                      the nine modules purchased from Creative Computer
                                      Solutions and completed the implementation of its
                                      integrated management information system by December
                                      31, 1996. However, four of the modules do not properly
                                      interface because they are based on older versions of
                                      software. The lack of interface between the modules
                                      requires multiple postings of the same information and
                                      increases the likelihood of data input errors. The Authority
                                      has an adequate system to identify information needs and
                                      has trained its personnel on the new systems. Additionally,
                                      the Authority has a security handbook and limits employees’
                                      access to information on a need to know basis.

 Creative Computer                    The Authority did not purchase the Creative Computer
 Solutions Payroll Module             Solutions payroll module because its payroll system was too
 Was Not Purchased                    complex for the module. The Creative Computer Solutions’
                                      payroll module could not readily accommodate the
                                      Authority’s 25 different union contracts and 160 cost
                                      centers.

                                      The Authority decided to continue to use the payroll
                                      module developed by American Management Systems.

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Chapter 13


                           Initially, the module did not readily interface with the
                           Creative Computer Solutions general ledger module. In
                           order to integrate the payroll information into the general
                           ledger, the Authority’s Management Information Systems
                           Department had to manually convert the American
                           Management Systems payroll account numbers to the
                           Creative Computer Solutions account numbering system.
                           However, at the end of May 1998, the Authority transferred
                           the American Management System payroll to the UNIX
                           mainframe that is used to run the Creative Computer
                           Solutions module. This eliminated the need to manually
                           convert the American Management Systems account
                           numbers to Creative Computer Solutions account numbers.
                           With this change, the American Management System was
                           fully integrated with the other Creative Computer Solutions
                           modules.

                           The Authority did not purchase the Creative Computer
 Creative Computer         Solutions budget module because the module could not
 Solutions Budget Module   accommodate the Authority’s 160 separate cost centers. As
 Was Not Purchased         an alternative, the Authority’s Budget Department
                           developed a budget preparation system using a combination
                           of LOTUS and EXCEL spreadsheet software.

                           We contacted Creative Computer Solutions and found that
                           no large Housing Authorities were using their budget
                           module. We also contacted the Cuyahoga Metropolitan
                           Housing Authority, a large housing authority that uses the
                           Creative Computer Solutions modules to determine how
                           they accomplished budgeting. The Cuyahoga Metropolitan
                           Housing Authority had a budget system on EXCEL
                           spreadsheet software that was similar to what the Chicago
                           Housing Authority was using.

                           Our evaluation of the Authority’s budget system found that
                           the system met the Authority’s needs. However, the
                           Authority’s budget was not being completed and submitted
                           for HUD approval in a timely manner (see Chapter 12).

                           The Authority implemented the nine modules developed by
 Some Modules Need To      Creative Computer Solutions. We requested examples of
 Be Updated                reports generated by the new system to determine if the
                           modules were functioning and if the reports were useful.
                           Based on the information we received, we believe the


99-CH-201-1801                    Page 74
                                                                           Chapter 13


                             reports provide useful information to the Authority’s
                             management and HUD.

                             Presently the tenant accounting, housing eligibility, work
                             orders, and fixed assets modules use older versions of
                             software and require manual manipulation to properly
                             interface with the other five modules that use updated
                             software. The updated software has faster processing
                             capability and includes an updated HUD Chart of Accounts.

                             The Authority is scheduled to receive the updated software
                             as it becomes available. A Sales and Marketing
                             representative from Creative Computer Solutions said the
                             updated versions of the four modules are scheduled for
                             release as follows:

                                    Module                       Target Release Date

                             Tenant Accounting                          01/01/99

                             Housing Eligibility                        01/01/99

                             Work Orders                                01/01/99

                             Fixed Assets                               01/01/99

                             The Authority’s Management Information Systems
                             Department staff estimated that it usually takes seven
                             months after the target release date for the Authority to
                             fully convert to an updated module. Therefore, the
                             Authority could have a fully updated system by July 31,
                             1999.

                             The Authority determines its management information needs
The Authority Assesses Its   based on input from its departments. The Management
Information Needs            Information System Department maintains a record of the
                             information requests received from the departments and the
                             actions taken in response to the requests. Based on our
                             review of the Department’s records and interviews with the
                             Directors of Payroll, Purchasing and Contracts, and Tenant
                             Accounting; and the Assistant Controller, we believe the
                             Authority’s process to address Management Information
                             needs is adequate. The Directors and Assistant Controller
                             said they were satisfied with the Management Information


                                     Page 75                             99-CH-201-1801
Chapter 13


                        Systems Department’s responses to their needs and
                        requests.

                        Our previous audit determined that as of August 1, 1996, the
 Employee Software
                        Authority had trained 363 employees on its standardized
 Training Needs Are
                        software. The Authority’s department directors assess their
 Assessed
                        employees’ needs for Management Information System
                        training based on current technology being used, the
                        employees position and job function, and planned future
                        technology to be used.         Training is conducted by
                        Management Information Systems Department staff and
                        classes are held on a monthly basis. A record of training
                        completed by employees is maintained by the respective
                        departments. We believe the Management Information
                        Systems Department’s program is adequate to train all
                        Authority employees. As of December 31, 1996, classes with
                        a total attendance of 823 employees had been conducted on
                        various software. During 1997, classes with a total attendance
                        of 1,472 employees were conducted.

                        The Authority’s Management Information Systems
 Information Security   Department developed an information systems security
 Policy Is In Place     handbook. This handbook became effective on December
                        27, 1996. The handbook is being used by the Authority to
                        limit employee access to computer software and information
                        based on position and need to know.

                        We reviewed the Security Handbook and found that it was
                        very comprehensive and covered the Authority’s needs for
                        security on the computer systems for each department using
                        the computer systems. We verified that the policies and
                        procedures contained in the handbook were being used by
                        the Authority.


                        Excerpts from the Authority’s comments follow. Appendix A,
 Auditee Comments       page 129, contains the complete text of the comments.

                        It is our intention to convert our modules within a
                        reasonable time frame after the actual release of the
                        packages. We will be conducting extensive testing of each
                        module and it's relationship with the rest of the packages. It
                        has been our experience that the software does not ship
                        initially without problems. We do NOT want to be a beta
                        test sight for the new release of these modules the way we

99-CH-201-1801                 Page 76
                                                                      Chapter 13


                    were with our initial purchase of Creative Computer
                    Solutions modules.

                    It is in the best interest of the Chicago Housing Authority to
                    not only convert/upgrade to the current releases of the
                    software, but also to insure that the Authority has a
                    workable system when done.

                    All of this will impact the date that we have a fully updated
                    system. Because of all these intangibles, we do not feel
                    comfortable at this time committing to a July 31, 1999
                    deadline. However, we will commit to beginning the
                    implementation six (6) months after each of the module
                    release dates.


                    We understand the Authority’s concern to ensure the remaining
OIG Evaluation of   modules create a workable system. We acknowledge that
Auditee Comments    requiring the Authority to commit to a July 31, 1999
                    implementation deadline may not be in the best interest of the
                    Authority. However, we believe the implementation should
                    occur as quickly as possible. We changed our recommendation
                    to require the Authority to, at a minimum, begin
                    implementation of each module within six months of its’ release
                    date.



Recommendations     We recommend that the Director of Public Housing, Illinois
                    State Office, assures that the Chicago Housing Authority:

                    13A.   Converts the tenant accounting, housing eligibility,
                           work orders, and fixed assets accounting modules to
                           the updated Creative Computer Solutions’ versions
                           within six months of the release dates of the updated
                           software.




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99-CH-201-1801                  Page 78
                                                                                             Chapter 14


                                Asset Management
The OIG review dated September 30, 1996 found that the Authority was in the process of
transferring management of some of its housing developments, including some of its more difficult
to manage developments, to private management firms. We determined that the Authority needed
to monitor the private management firms to ensure that housing developments were properly
managed and maintained in a decent, safe, and sanitary condition. Additionally, the previous
review found that the Authority did not have adequate control over its pension fund and deferred
compensation program.

As a result, we recommended that HUD assure the Authority: (1) monitor the private firms that
manage Authority housing developments to ensure the developments are maintained in an adequate
manner, according to the management contracts, and takes appropriate action if firms do not properly
manage the developments; (2) establish coordination procedures between Private Management
Administration and Department of Finance for Public Housing/Private Management for monitoring the
private firms; (3) execute contracts with the legal and actuarial firms selected for award; (4) oversee the
contracts awarded for the pension fund and takes appropriate action if the contractors do not
effectively perform the required services; and (5) establish controls to ensure the deferred
compensation contract is adequately monitored and appropriate actions are taken if the firm under
contract is not properly managing the deferred compensation program.


                                         As of July 31, 1998, the Authority took actions that
 Observations                            resolved three of the five recommendations from our
                                         previous report. The Authority placed sole responsibility for
                                         monitoring the private management contracts under the Private
                                         Management Division. The Authority executed contracts for
                                         legal and actuarial services for its pension fund and was
                                         adequately overseeing the pension fund contracts.

                                         The Authority did not establish policies and procedures for
                                         monitoring its private management firms. The Authority also
                                         did not establish controls to ensure its deferred compensation
                                         contract was adequately monitored.

                                         In September 1997, the Authority placed the responsibility to
 The Private Management                  monitor private management contracts under the Private
 Division Was                            Management Division. A Budget Analyst from the Private
 Restructured                            Management Division reviews payment requests and budget
                                         revisions submitted by private management firms. Previously,
                                         these functions were performed by the Department of Finance
                                         for Public Housing/Private Management. Since monitoring
                                         responsibilities are now centralized in one function, our
                                         recommendation to establish coordination procedures between

                                                  Page 79                                  99-CH-201-1801
Chapter 14


                           the Private Management Division and the Department of
                           Finance is no longer necessary.

                           The Authority executed contracts for legal and actuarial
 Legal And Actuarial       services for its pension fund that initially became effective on
 Contracts Were Executed   January 1, 1997. These contracts were renewed and are
                           currently effective through June 30, 1999.

                           The Pension Plan Administrator and the Board of Trustees
 The Pension Fund          effectively monitored the pension fund contracts. The Plan
 Contracts Were Properly   Administrator monitored the contracts through reviews of
 Monitored                 contract invoices, periodic visits to the contractors’ offices,
                           semiannual meetings with the Plan’s investment managers, and
                           read-only access to the Plan custodian’s record keeping system.

                           The Board of Trustees met on a monthly basis. Payments for
                           contract invoices of less $1,000 were approved by the Plan
                           Administrator. The payments were reviewed by the Board of
                           Trustees at monthly meetings. Payments for contract invoices
                           greater than $1,000 were reviewed and approved by the Board
                           of Trustees at the monthly meetings. The invoices we
                           reviewed showed evidence of proper review and approval.

                           The Authority did not establish policies and procedures to
 The Authority Did Not     monitor its private management firms.         There are no
 Develop Private           standardized reports or forms that document the monitoring of
 Management Contract       the private management firms.
 Monitoring Procedures
                           We interviewed four Contract Administrators in the Private
                           Management Division to determine how they monitored the
                           private management firms. The Contract Administrators said
                           the monitoring was accomplished primarily through periodic
                           site visits and review of monthly reports submitted by the
                           private management firms.

                           We reviewed the monthly reports for five privately managed
                           developments and did not find any evidence to show that they
                           had been reviewed by the contract administrators. Although
                           the contract administrators said they visited the developments
                           at least monthly, there was no evidence that they conducted
                           tenant file reviews or unit inspections at four of the five
                           developments during 1998. A file review was conducted on
                           the fifth development during our review. Maintaining a record
                           of the scope, method, and results of monitoring reviews is
                           necessary to document problems identified and to ensure

99-CH-201-1801                     Page 80
                                                                           Chapter 14


                        effective corrective actions are implemented. HUD and the
                        Authority lack assurance that the private management firms are
                        properly managing the properties.

                        In May 1998, the consulting firm of Abt & Associates issued a
                        report on the Authority’s private management program. The
                        report concluded in part that the Authority had insufficient
                        property-based monitoring systems. Specifically, the report
                        stated that the Authority did not have a systematic way of
                        evaluating firms or asking firms for operating information on a
                        regular basis.

                        The recommendations in the consultant’s report related to
                        contract monitoring were: (1) develop an improved and
                        standardized budgeting and monthly reporting system; (2)
                        establish property standards for firms and contract
                        administrators; and (3) improve the contract administration
                        system. If implemented, the consultant’s recommendations
                        should assist the Authority in improving its private
                        management contract monitoring function.

                        The Director of Housing Management said the new acting
                        Director of Private Management will be implementing the
                        consultant’s recommendations. The tasks to implement the
                        consultant’s recommendations were included in the
                        proposed work plan of the new acting Director of Private
                        Management. The acting Director has not yet established a
                        time frame for implementing the consultant’s
                        recommendations because she in the process of hiring staff
                        for the Private Management Division.

                        The Authority did not establish controls to ensure the deferred
The Deferred            compensation contract was adequately monitored. Although
Compensation Contract   the Authority’s Human Resources Department was responsible
Was Not Adequately      for monitoring the contract, it did very limited monitoring of
Monitored               the deferred compensation contract.

                        The only documentation that the Human Resources
                        Department received from the deferred compensation plan
                        contractor was a quarterly trial balance containing the account
                        balances of plan participants. The Authority did not verify the
                        accuracy of the trial balance to the Authority’s records. The
                        Human Resources Department only used this trial balance to
                        verify the transfer of funds from the previous deferred
                        compensation plan contractor and to answer employee

                                Page 81                                99-CH-201-1801
Chapter 14


                     inquiries. We believe adequate monitoring of the contract
                     should include verification of the accuracy and support of all
                     contributions and withdrawals.


                     Excerpts from the Authority’s comments follow. Appendix A,
Auditee Comments     pages 162 and 183, contains the complete text of the
                     comments.

                     The Authority has reviewed past practices and procedures
                     to monitor the private management firms contracted for
                     management of properties assigned to their portfolio.
                     Procedures will be written and compiled, and staff will be
                     trained to ensure contract compliance and proper
                     monitoring controls are in place. The Department has
                     reviewed the ABT report and recommendations on the
                     structure and functions of Asset Management.           The
                     Department has been restructured and will analyze and
                     implement the recommendations set forth in their report. A
                     workplan will be developed to address the actions
                     recommended in the report.

                     The Authority disagrees, partially with this finding. The
                     deposits are verified. The Payroll Department sends Public
                     Employees Benefit Services Corporation, the plan
                     administrator, a copy of the check request and the list of
                     plan participants and the amounts for each deposit. Payroll
                     usually gets confirmation every two weeks. If there are any
                     discrepancies they are resolved at that time. Withdrawals
                     are not monitored. Public Employees Benefit Services
                     Corporation is contracted to administer this program and
                     the funds are the employees not the Authority’s. Each
                     participant receives quarterly statements and as of today we
                     have not received any complaints. Since the Authority does
                     not have formal policies and procedures for monitoring the
                     deferred compensation plan, we will prepare them by year-
                     end.


                     The actions the Authority plans to take to address private
 OIG Evaluation of   management issues should improve the Authority’s private
 Auditee Comments    management program when the actions are fully implemented.
                     The confirmation received from the contractor shows the
                     total funds that were deposited into the deferred
                     compensation plan; however, it does not provide any

99-CH-201-1801              Page 82
                                                                   Chapter 14


                  information on fund withdrawals from the plan. For
                  effective monitoring of the deferred compensation plan, the
                  Authority needs to include policies and procedures that
                  provide assurance on the accuracy of the account.



Recommendations   We recommend that the Director of Public Housing, Illinois
                  State Office, assures that the Chicago Housing Authority:

                  14A.   Establishes policies and procedures for monitoring
                         the private management firms.

                  14B.   Analyzes the consultant’s May 8, 1998 report on
                         private management and takes appropriate actions.

                  14C.   Establishes policies and procedures for monitoring its
                         deferred compensation plan contract.




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99-CH-201-1801                  Page 84
                                                                                        Chapter 15


                              Risk Management
The OIG review dated September 30, 1996 determined that the Authority’s in-house
administration of the workers’ compensation program was not effectively, efficiently, or
economically managed. The program was administered without proper planning, management,
staffing, and written policies and procedures. The Authority also lacked a resident safety training
program and did not conduct an adequate analysis of its insurance coverage.

We recommended that HUD assure that the Authority: (1) aggressively monitor the workers’
compensation contract and implement appropriate actions if the administering firm did not
properly manage the program; (2) periodically conduct an analysis to determine if it is more cost
effective to contract out the administration of the workers’ compensation program versus the
Authority administering the program in-house; (3) develop procedures to periodically assess its
risk management program and make changes to address new conditions; (4) develop procedures
to track hazardous conditions; and (5) initiate safety training for its residents.


                                      The Authority implemented two of the five recommendations
 Observations                         from our prior report. The Authority adequately monitored the
                                      workers’ compensation insurance contract. The Authority also
                                      developed procedures to periodically assess its risk
                                      management program and make changes to address new
                                      conditions. The Authority decided not to conduct the cost-
                                      benefit analysis. Given the improved administration of the
                                      workers’ compensation program through outsourcing, the
                                      Authority’s decision appears reasonable.

                                      The Authority did not develop procedures to track hazardous
                                      conditions and it did not initiate a safety training program for
                                      its residents

                                      The Authority adequately monitored the workers’
 The Authority Adequately             compensation contract. The Risk Management Department
 Monitored The Workers’               conducted four case file reviews to assess the contractor’s
 Compensation Contract                performance. One file review was completed in 1996, two
                                      in 1997, and one in 1998. The results of the file reviews
                                      indicated that the contractor was effectively administering
                                      the workers’ compensation program.




                                               Page 85                                99-CH-201-1801
Chapter 15


                            The Authority did not periodically conduct an analysis to
 The Authority Did Not      ensure that contracting out the administration of the Workers’
 Periodically Analyze       Compensation Insurance Program was more effective than
 Administration Of The      performing the function in-house. The Director of Risk
 Workers’ Compensation      Management did not feel that an analysis was necessary
 Program                    given the Authority’s poor in-house administration of the
                            program in the past compared to the current performance of
                            the contractor.

                            The contractor reduced the backlog of outstanding claims from
                            1,150 to 550. Deloitte & Touche LLP reviewed the workers’
                            compensation reserves for 1996 and 1997 and concluded that
                            the outsourcing of the program had a very positive impact on
                            the workers’ compensation program. Based on the results of
                            the Deloitte & Touche reviews, we agree with the Authority’s
                            decision to forgo the cost benefit analysis. However, to ensure
                            the operation of the program remains efficient and effective, the
                            Authority needs to periodically conduct a cost analysis or
                            continue to obtain independent feedback on the contractor’s
                            performance.

                            The Risk Management Department assessed its risk
 The Risk Management        management program annually. The assessment of the risk
 Program Was Periodically   management program was documented in the Risk Control
 Assessed                   Work Plan. The work plan included various tasks that
                            needed to be accomplished during the year based upon the
                            assessment of the risk management program. Examples of
                            such tasks included providing defensive driver training and
                            certification to employees, and removing old and unusable
                            playground equipment. We reviewed the 1998 Risk Control
                            Work Plan and found that the plan reflected an adequate
                            assessment of the risk management program.

                            The Authority’s Risk Management Department performed
 Procedures Were Not        annual inspections of all the Authority’s buildings to identify
 Developed To Track         hazardous conditions that could result in a liability to the
 Hazardous Conditions       Authority.     The Risk Management Department’s Self
                            Inspection Site Form was used to document the site
                            inspections.

                            During 1997, the Risk Management Department site inspection
                            reports were sent to the Customer Service Center for
                            preparation of work orders to correct the hazardous conditions
                            that were identified. However, the Customer Service Center
                            advised the Risk Management Department that no work orders

99-CH-201-1801                      Page 86
                                                                           Chapter 15


                       were prepared because many of the work items duplicated
                       work orders previously requested by the respective
                       development managers.

                       In 1998, the Risk Management Department has not forwarded
                       any of its site inspection reports to the Customer Service
                       Center. The Director of Risk Management said the reports
                       have not been forwarded because the Risk Management
                       Department is in the process of developing a method to
                       eliminate duplicate work orders.

                       We reviewed three completed site inspection reports prepared
                       during 1997 and 1998 and determined the information
                       contained in them was not always specific enough to prepare
                       appropriate work orders or determine if the reported conditions
                       duplicated existing work orders. For example, one of the
                       inspection reports indicated that some stairwells in the building
                       needed work. The specific location and type of work needed
                       were not listed on the inspection report.

                       In our opinion, the Authority did not give adequate attention to
                       track and correct hazardous conditions. The inadequate
                       information provided to the Customer Service Center and the
                       inaction in creating work orders or resolving the reported
                       problems indicates coordination between the Risk Management
                       Department, the Customer Service Center, and the
                       Development Managers is inadequate. There is a need for
                       policies and procedures that ensure conditions are accurately
                       reported and corrected.       The elimination of hazardous
                       conditions helps reduce the Authority’s liability and avoid
                       negative publicity.

                       The Authority did not train its residents on safety-related
A Resident Safety
                       issues. The purpose of the resident safety training program
Training Program Was
                       is to instruct residents on safety procedures to ensure they
Not Initiated
                       will take proper actions in emergency situations, thus
                       reducing casualty and property losses.

                       The Director of Risk Management could not explain why
                       training was not conducted or provide a date when the
                       safety orientation and training procedures will be developed
                       and implemented.




                               Page 87                                  99-CH-201-1801
Chapter 15



                     Excerpts from the Authority’s comments follow. Appendix A,
Auditee Comments     page 163, contains the complete text of the comments.

                     We are in fundamental agreement with your audit findings
                     for the Risk Management Department.

                     We understand the need for periodic assessment of program
                     effectiveness. In 1999, the Risk Management Department
                     will conduct a Best Practices Study of Workers'
                     Compensation Program Administration in Public Housing
                     Authorities.

                     We have developed procedures to adequately track
                     hazardous conditions at Authority properties. We have not
                     successfully implemented these procedures due to staff
                     turnover in Risk Management and Customer Service. In the
                     4th quarter of 1998 and 1999 we will refocus our safety
                     resources to work closely with Customer Service on hazard
                     identification, work order generation, and work order
                     tracking.

                     The Authority’s Risk Management Department has
                     developed a plan to improve resident awareness and training
                     to reduce liability hazards on our properties. Due to staff
                     turnover, implementation of these plans has not been as
                     active as we would have wished. Our safety staff is now in
                     place and making strides toward the implementation of
                     resident safety awareness training. Our 1999 Risk Control
                     Work Plan will detail the safety initiatives targeted for
                     residents. The Risk Control Work Plan for 1999 will be
                     finalized by December 15, 1998.


                     The Risk Management Department’s planned action to
 OIG Evaluation of   conduct a best practices study of workers’ compensation
 Auditee Comments    program administration in large housing authorities should
                     provide an appropriate measure of program effectiveness.
                     However, the Authority also needs to develop procedures
                     to periodically conduct a cost analysis of the workers’
                     compensation program or obtain third party verification
                     regarding the effectiveness of the contractor’s management
                     of the program. The Department’s planned actions for
                     tracking and correcting hazardous conditions and resident


99-CH-201-1801              Page 88
                                                                     Chapter 15


                  safety training initiatives should resolve the conditions cited
                  in this Chapter if the actions are fully implemented.


Recommendations   We recommend that the Director of Public Housing, Illinois
                  State Office, assures that the Chicago Housing Authority:

                  15A.   At least annually conducts a cost analysis of the
                         workers’ compensation program or obtains third
                         party verification regarding the effectiveness of the
                         contractor’s management of the program.

                  15B.   Develops coordination procedures between the Risk
                         Management Department, the Customer Service
                         Center, and Development Managers to track and
                         eliminate hazardous conditions at the Authority’s
                         developments.

                  15C.   Develops and implements a safety orientation and
                         training program for its tenants.




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99-CH-201-1801                  Page 90
                                                                                          Chapter 16


                                        Personnel
The OIG review dated September 30, 1996 determined that the Authority did not have an
adequate system to achieve a committed, competent, and professional work force. Specifically,
site managers did not meet HUD’s certification requirements; performance evaluations were not
effective; and a skills test administered by the Authority raised concerns that the recruiting process
was not effective and housing management staff were not qualified. Additionally, the Authority’s
job descriptions were inaccurate and not useful in hiring personnel or evaluating performance, and
employees’ salaries bore little relevance to the market.

As a result, we recommended that the Authority: (1) assure each of its managers met HUD’s
certification requirements; (2) develop and implement strategies to address the skill level of all its
staff, and the issue of staff who did not meet minimum required skill levels; (3) develop an
effective recruiting strategy that properly assessed the qualifications of potential employees; (4)
appoint qualified instructors and implemented housing management core training courses; (5)
establish and implement procedures to consolidate the tracking of training received by its
employees; and (6) update all job descriptions and completed the implementation of a
compensation system that was developed as a result of a 1994 consultant study.


                                       The Authority took actions that resolved three of the six
 Observations                          recommendations from our previous report and partially
                                       resolved two other recommendations. The Authority: (1)
                                       assured that all of its property managers were certified as
                                       housing managers; (2) developed and implemented a
                                       strategy to address the skill level of its staff and the issue of
                                       staff who did not meet minimum required skill levels; and
                                       (3) appointed qualified instructors and implemented core
                                       training courses. Although the Authority improved its
                                       recruiting process by developing a skills test and sources for
                                       recruiting, it did not have written procedures for its
                                       recruiting process. The Authority also completed the
                                       implementation of its compensation system, but did not
                                       complete the revision of all job descriptions.

                                       The Authority did not establish procedures to consolidate
                                       the tracking of all training received by its employees.

                                       Of the eleven site managers that were not certified at the
 Authority Managers                    time of our last review, five managers obtained the Certified
 Received Housing                      Manager of Housing designation, and the remaining six
 Manager Certification                 managers were either terminated or had resigned by April
                                       30, 1997.


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                           As of July 1998, all but one of the Authority’s property
                           managers had been certified as Registered Housing
                           Managers.       The remaining property manager was
                           completing the final phase of the certification process at the
                           time of our review.

                           In November 1996, the Authority initiated a Performance
 A Strategy Was            Management Program to address the skill level of its staff,
 Developed And             and the issue of staff who did not meet minimum required
 Implemented To Evaluate   skill levels. Key elements of the Performance Management
 Staff Skill Levels        Program are:

                              •   Performance Planning - During the             year-end
                                  performance review, the manager and          employee
                                  agree upon performance expectations           for the
                                  upcoming 12-month period and identify        employee
                                  training needs.

                              •   Ongoing Coaching - Formal and/or informal
                                  discussions throughout the year are held to assist the
                                  employee in meeting expectations discussed at the
                                  beginning of the year.

                              •   Interim Evaluation - The semi-annual performance
                                  evaluation is measured on progress toward mutually
                                  agreed upon goals and objectives established at the
                                  beginning of the year.

                              •   Annual Performance Evaluation - The evaluation of
                                  the entire year’s job performance requirements and
                                  agreed upon goals are used to determine the overall
                                  performance rating.

                           The Performance Management Program requires an
                           employee performing unsatisfactorily to be placed on a
                           Corrective Action Plan. The Corrective Action Plan
                           establishes a date on which the employee’s performance will
                           be reassessed. If the employee’s job performance is still
                           unsatisfactory, the employee is terminated.

                           We     reviewed      Performance       Management       Plan
                           documentation for four employees and found that the
                           system was effectively used to evaluate the employees’ skills
                           and performance. Additionally, we noted one recent


99-CH-201-1801                    Page 92
                                                                                Chapter 16


                             instance of an employee who was terminated for failure to
                             comply with a Corrective Action Plan.

                             The Authority implemented core training courses that it
Training Courses Were        established to train housing management personnel. During
Implemented And              1997 and 1998, the Authority conducted 162 core training
Qualified Instructors Were   courses in the areas of Administration and Support,
Appointed                    Maintenance for Managers, and Management and
                             Leadership. Additionally, the Authority trained an average
                             of 83 employees each month in Management Information
                             System training courses. We reviewed the resumes of five
                             instructors and found that the individuals were adequately
                             qualified.

                             The Authority developed a list of sources to be used to recruit
The Authority Improved       personnel. The list is extensive and includes sources such as
Its Recruiting Process       internal and external job postings; newspaper
                             advertisements; job fairs; professional organizations; and
                             campus recruiting. However, the Authority did not have
                             written procedures on how the sources are to be pursued or
                             assess their effectiveness.

                             To address the poor quality of some maintenance hires in
                             the past, in September 1997, the Authority began
                             administering the Wonderlic Basic Skills Test to all
                             maintenance hires (except college graduates and certified
                             personnel). Job applicants must pass this test prior to being
                             hired. Two of three development managers we interviewed
                             said the quality of new hires had improved since inception
                             of the testing program. The other manager interviewed said
                             while he believed the overall staff quality had not changed,
                             the new hires were better able to comprehend written work
                             orders.

                             We believe the Authority needs to develop written
                             procedures to ensure recruiting is effectively accomplished.
                             The Authority’s action to administer the basic skills test
                             should improve the quality of its maintenance employees.

                             The Authority implemented the compensation levels that
The Authority Completed      were developed as a result of a 1994 consultant study. Our
Implementation Of Its        previous review found that because of budget difficulties,
Compensation System          the Authority had not implemented the consultant’s
                             recommendations to address outdated pay rates. We


                                     Page 93                                99-CH-201-1801
Chapter 16


                            verified that the Authority’s revised pay scale was based on
                            the consultant’s recommendations.

                            The Authority completed the revision of the job descriptions
 Job Descriptions Were
                            for approximately 90 percent of its employees. However,
 Not Updated For All
                            due to the workload of the employees revising the job
 Employee Positions
                            descriptions, the revision of the remaining job descriptions is
                            not projected to be completed until July 1999. The
                            Authority needs to update all job descriptions as
                            expeditiously as possible to ensure employees are accurately
                            and fairly evaluated.

                            The Authority implemented a centralized system to track
 Tracking Of All Training
                            training received by its employees. The tracking system
 Was Not Consolidated
                            included a record for each employee, listing training courses
                            and dates completed, grades or certificates, and Continuing
                            Education Units earned.

                            However, courses offered by the Management Information
                            Systems Department were not included in the Authority’s
                            tracking system. The Authority plans to incorporate the
                            Management Information Systems Department training
                            courses into the tracking system, but the Director of the
                            Management Information Systems Department could not
                            provide us with an estimated date when this would occur.
                            It is important for the Authority to consolidate all training
                            courses into one tracking system to ensure that personnel
                            receive training on required skills and to prevent
                            unnecessary duplication.


                            Excerpts from the Authority’s comments follow. Appendix A,
Auditee Comments            page 169, contains the complete text of the comments.

                            We have complied with another recommendation, the
                            development of an effective recruiting strategy that properly
                            assessed the qualifications of potential employees. As a
                            point of clarification, a recruiting strategy does not assess
                            qualifications but rather, it determines the methodology by
                            which potential employees will be identified.

                            We have also complied with the recommendation regarding
                            the establishment and implementation of procedures to
                            consolidate the employees’ training. While a database has
                            been established, the Management Information Systems

99-CH-201-1801                      Page 94
                                                                      Chapter 16


                    Department has been unable to provide us with their
                    training data so that we can consolidate the information.

                    Finally, we have also complied with the sixth
                    recommendation: Prior to 1997 the Authority had over 900
                    job descriptions. Over 600 of these descriptions were
                    targeted for the Hay conversion. The Hay analysis involved
                    the reduction and consolidation of job titles. The resultant
                    350 job classifications were implemented in January of
                    1997. Pending descriptions are a result of on-going
                    reorganizations and newly created jobs.


                    We do not agree that the Authority fully complied with our
OIG Evaluation of   prior audit recommendations concerning its recruiting
Auditee Comments    process, tracking of employee training, and revision of all
                    job descriptions. However, as stated in our observation, the
                    Authority has made progress in each of the areas.

                    Although the Authority developed a list of recruiting
                    sources, it still needs to develop procedures to ensure
                    consistent and effective use of the recruiting resources.

                    The Authority’s consolidated employee training tracking
                    system needs to include Management Information System
                    training courses.

                    We determined that all job descriptions had not been revised
                    based on information obtained from employees who were
                    responsible for revising the job descriptions. The Authority
                    did not provide documentation to show that pending
                    revisions were for newly created jobs. The Authority needs
                    to update its job descriptions as expeditiously as possible to
                    ensure employees are effectively evaluated.



Recommendations     We recommend that the Director of Public Housing, Illinois
                    State Office, assures that the Chicago Housing Authority:

                    16A.   Develops written procedures on the use and
                           assessment of the recruiting process.

                    16B.   Incorporates Management Information System
                           Department courses into its centralized training
                           tracking system.

                            Page 95                                99-CH-201-1801
Chapter 16



                 16C.   Completes the revisions of all remaining job
                        descriptions.




99-CH-201-1801          Page 96
                                                                                         Chapter 17


             Resident Program Delivery Systems
The OIG review dated September 30, 1996 determined that the Authority initiated plans to hire
urban planners to work with residents to produce a long-term strategic plan for physical and
social service needs. The Authority established a Development Initiatives Division in August
1996 to assist tenants with resident programs; however, the Authority did not develop policies
and procedures for the Division’s operation. A transitional facility for families in crisis was
established at the Ida B. Wells development in June 1995. The Authority entered into a contract
with the Educational Training and Enterprise Center in August 1996 to: identify issues and needs
involving existing service and delegate agencies; evaluate the effectiveness of existing service
delivery systems; conduct a cost benefit analysis of the delivery systems and identify future needs.
Once the Educational Training and Enterprise Center completed its review, the Authority planned
to identify potential/future services and delegate agencies.

To ensure the Authority continued to improve its resident delivery systems, we recommended that
HUD assure the Authority: (1) extend all urban planner contracts before the original contract
expired, and put the contract extensions in writing; (2) execute contracts with urban planners for
Dearborn Homes, Robert Taylor B, Wentworth Gardens, Hilliard Homes, Lathrop Homes,
Washington Park, and Trumbull Park; (3) select an urban planner as expeditiously as possible for
the remaining eight Local Advisory Councils; (4) establish policies and procedures for its
Development Initiatives Division; (5) establish a transition facility at the ABLA Homes
development when the necessary funding is obtained and explore establishing additional transition
facilities at other developments based upon the needs of the residents; (6) monitor the contract
with the Educational Training and Enterprise Center to ensure the Authority receives the required
services; (7) take appropriate action based on the Educational Training and Enterprise Center’s
report to select, for continued use, the existing services and delegate agencies that best meet the
residents’ needs.

Finally, in relation to potential/future services we recommended that HUD assure the Authority:
(8) identify and evaluate their delivery systems; (9) conduct a cost/benefit analysis of their service
delivery systems; (10) select the systems that best meet the residents’ needs; and (11) monitor
services and delegate agencies to ensure the residents’ needs are being addressed.


                                       As of September 30, 1998, the Authority had fully
 Observations
                                       implemented three and partially implemented one of the
                                       eleven recommendations. The Authority executed contracts
                                       with urban planners on behalf of Local Advisory Councils.
                                       The Authority established policies and procedures for its
                                       Development Initiatives Division. Also, the Authority
                                       monitored the contract with the Educational Training and
                                       Enterprise Center. The Educational Training and Enterprise
                                       Center’s report was completed on April 29, 1997. The
                                       Authority did not establish a transition facility at ABLA

                                                Page 97                               99-CH-201-1801
Chapter 17


                           Homes due to lack of        funds; however, in lieu of a
                           comprehensive facility,     the Authority established a
                           relocation and Section 8   counseling office at ABLA and
                           family self-sufficiency    classes were conducted for
                           transitioning families.

                           We were unable to determine if the Authority extended its
                           urban planners contracts before the contracts expired and
                           put the extensions in writing, since the Authority did not
                           provide documentation to support the contract extensions.
                           The Authority did not select, for continued and
                           potential/future use, those existing services and delegate
                           agencies that were shown to best meet the residents’ needs.
                           The Authority also did not evaluate its delivery systems and
                           conduct a cost/benefit analysis of its delivery systems.

                           Between May 1997 and September 1998, the Authority
 Urban Planners Were       executed 15 contracts with urban planners. Contracts were
 Hired                     executed for the following Local Area Councils: (1) Hilliard
                           Homes; (2) Trumbull Park; (3) Dearborn Homes; (4) Robert
                           Taylor B1 and B2; (5) Washington Park; (6) Julia Lathrop
                           Homes; (7) Robert Taylor A1 and A2; (8) Stateway
                           Gardens; (9) Wells Homes and Extension; (10) Lowden
                           Homes; (11) Madden Park; (12) Rockwell Gardens; (13)
                           ABLA Homes; (14) LeClaire Courts; and (15) Wentworth
                           Gardens. It was important for the Authority to select the
                           urban planners, since the planners will work with residents
                           and involve them in the development of a long-term
                           strategic plan for physical and social service needs.

                           Policies and procedures were developed for each of the four
 Policies And Procedures   departments that comprise the Development Initiatives
 Were Established          Division:    Community        Redevelopment;      Relocation;
                           Homeownership; and Social Services/Delegate Agencies.
                           The policies and procedures included, among other things:
                           (1) a department description which contained the
                           department’s primary function and goals; (2) an
                           organizational chart; (3) professionalism policies; (4) office
                           procedures; and (5) department specific information. We
                           reviewed the policies and procedures and believe they are
                           adequate in scope and content.




99-CH-201-1801                    Page 98
                                                                             Chapter 17


                            The Authority monitored its contract with the Educational
The Authority Monitored     Training and Enterprise Center, and determined that the
The Contract                objectives of its contract with the Center were met. Based
                            on our review of the Center’s report, issued on April 29,
                            1997, we concluded the Center satisfied the objectives of its
                            contract.   The Center evaluated the effectiveness of
                            programs and services offered by the Office of Resident
                            Programs and identified future service needs.

                            The Authority did not establish a transition facility at ABLA
A Transition Facility Was   Homes. The Authority was unable to obtain the necessary
Not Established At ABLA     funding from the State of Illinois. Since funds are
Homes                       unavailable, the Authority has no plans to establish a
                            comprehensive transition facility at the development.

                            Although a comprehensive facility was not established, the
                            Authority took a proactive role to address the needs of its
                            residents. The Authority established a relocation and
                            Section 8 counseling office at ABLA Homes, and family
                            self-sufficiency classes are conducted for transitioning
                            families. Additionally, the Authority requested funding in its
                            HOPE VI application for an extensive family transition and
                            self-sufficiency program. If funding is obtained, the on-site
                            services will be expanded. Given the funding restrictions,
                            we believe the Authority took adequate steps to address the
                            transition needs of its residents.

                            We were unable to determine if proper procedures were
No Assurance Exists That    followed when urban planner contracts were extended. The
Contract Extensions Were    Development Initiatives Division Director approved the
Proper                      extension of seven expired urban planner contracts.
                            However, the Director did not provide any documentation
                            that showed the extensions occurred before the original
                            contract expired or that the extensions were in writing.
                            Section 3.03 of the Authority’s contracts requires contract
                            extensions to be granted prior to the expiration of the
                            original contract and to be in writing. Requiring written
                            contract extensions protects HUD’s and the Housing
                            Authority’s interests by providing a legal basis to take
                            appropriate action if the contractor does not comply with
                            the terms of the contract.




                                    Page 99                                99-CH-201-1801
Chapter 17


                           The Authority did not select, for continued and future use,
 The Authority Plans To    those services and delegate agencies that were shown to best
 Select Service Agencies   meet the residents’ needs. The Authority did not select the
 And Monitor Them          services and delegate agencies because of delays associated
                           with the movement of the Social Services and Delegate
                           Agencies Department to the Development Initiatives Division.
                           The Department was moved as a result of the Educational
                           Training and Enterprise Center report which recommended the
                           change to improve assistance to residents.

                           The Division is developing strategic plans to address the human
                           capital and social service needs of the residents of each
                           development and has instituted a resident survey process that
                           identifies family needs. The information obtained from each
                           development’s strategic plan and resident surveys, along with
                           the Educational Training Center report will be used to define
                           the types of organizations that should provide services to
                           residents. The Director of the Development Initiatives Division
                           anticipates that the agencies for existing services will be
                           selected by December 1, 1998, and those for potential/future
                           services by December 31, 1999. We believe the Authority is
                           making progress to improve its resident services.

                           The Authority plans to monitor the resident services and
                           delegate agencies. The Social Services and Delegate
                           Agencies department is developing “residential review
                           committees” that will be trained to participate in quarterly
                           and annual monitoring activities.         New tools are in
                           development that will include a revised work plan with
                           goals and outcomes that are tied to the services identified by
                           residents. Development of the new tools is scheduled to be
                           completed by December 31, 1998. If the Authority follows
                           through and develops residential review committees and
                           creates a revised work plan, the Authority should have a
                           system to adequately monitor its resident services and delegate
                           agencies.


                           Excerpts from the Authority’s comments follow. Appendix A,
Auditee Comments           page 171, contains the complete text of the comments.

                           The Authority concurs with all of the observations and
                           recommendations with the exception of the statement
                           regarding Urban Planning Contract extensions.


99-CH-201-1801                     Page 100
                                                                     Chapter 17


                    Documentation indicates that contracts were extended prior
                    to the expiration date and that vendors were notified of the
                    extensions.       In order to ensure that additional
                    documentation is on file, in the future we will send form
                    letters to vendors and place a copy in their file.


                    The documentation provided by the Authority does not
OIG Evaluation of   support that the contracts were extended before their
Auditee Comments    expiration date and were in writing. The documentation
                    included an internal E-mail message from the Purchasing
                    Department to the Development Initiatives Division notifying
                    the Division of the expiration of the contracts. The message
                    was dated one day after the contracts expired. Information
                    provided to us during the audit indicated seven contracts had
                    been extended; however, the Authority’s comments indicate
                    only one was extended. The Authority did not provide
                    documentation to support that the extension was in writing.
                    The Authority only provided documentation that showed the
                    contract’s expiration date was changed in the Authority’s
                    Accounting System records. Contract extensions need to be in
                    writing to protect HUD’s and the Housing Authority’s interests
                    by providing a legal basis to take appropriate action if the
                    contractor does not comply with the terms of the contract.


                    We recommend that the Director of Public Housing, Illinois
Recommendations     State Office, assures that the Chicago Housing Authority:

                    17A.   Extends all urban planners contracts before the
                           original contract expires and puts the extension in
                           writing.

                    17B.   Identifies and evaluates potential/future services and
                           delegate agencies’ delivery systems and conducts a
                           cost/benefit analysis of the systems.

                    17C.   Selects for continued and future use those existing
                           and potential services and delegate agencies that are
                           shown to best meet the residents’ needs.

                    17D.   Monitors services and delegate agencies to ensure
                           the residents’ needs are addressed.




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99-CH-201-1801                  Page 102
                                                                                      Chapter 18


          Economic Development Opportunities
                    for Residents
The OIG review dated September 30, 1996 determined that the Chicago Housing Authority had:
encouraged the development of joint venture agreements with resident owned companies and
local private sector businesses, and established a yearly goal of 25 contracts to be executed with
resident owned companies. The Authority also implemented a Section 3 policy which requires
resident hiring be used on all construction and service contracts that contain a labor component,
or that training be provided or funded. Further, the Authority developed partnership agreements
with various government, non-profit, and private sector agencies to support its resident training
and employment programs.

To ensure these efforts continued, we recommended that HUD assure that the Authority: (1)
emphasize the development of joint venture agreements between the resident owned companies
and private sector businesses; (2) monitor the construction and service contractors to ensure
Section 3 requirements were complied with; (3) identify government, non-profit, and private
sector agencies to form partnerships for resident training and employment programs; (4) complete
surveys to assess resident satisfaction by January 31, 1998; (5) take appropriate action based upon
the results of the resident surveys; and (6) work to expeditiously complete its pending contracts
and continue to explore additional contracts with the resident owned companies in order to reach
the yearly goal of 25 contracts.


                                      As of September 11, 1998, the Chicago Housing Authority
 Observations                         implemented four of the six recommendations.             The
                                      Chicago Housing Authority: (1) continued to emphasize the
                                      development of joint venture agreements between resident
                                      owned companies and private sector businesses; (2)
                                      monitored the construction and service contractors to
                                      ensure residents received employment and training
                                      opportunities, and withheld amounts from contractors who
                                      failed to comply with the Section 3 requirement; (3)
                                      continued to identify government, non-profit, and private
                                      sector agencies with which to form partnerships supporting
                                      the resident training and employment programs; and (4)
                                      completed two resident surveys. The Authority plans to
                                      take appropriate actions based on the results of its surveys.
                                      The Authority did not meet its yearly goal to execute 25
                                      contracts with resident owned businesses in 1996.
                                      However, the Authority met its goal for 1997 and was on
                                      track to meet its goal for 1998 to execute $10 million of
                                      contracts with resident owned businesses.


                                             Page 103                               99-CH-201-1801
Chapter 18


                            The Authority continued to develop joint venture
 Joint Venture Agreements   agreements between resident owned companies and private
 Were Developed             sector businesses. As of July 9, 1998, a total of 50 resident
                            owned businesses had joint venture agreements. For
                            example, joint venture agreements were made with:
                            Coleman Development Corporation, Creative International
                            Incorporated, Dearborn RMC Construction, William Green
                            Homes Laundromats, and Things to Do Laundromats.

                            In December 1996, the Authority's Section 3 policy was
 Construction And Service
                            revised to require resident hiring be used on all of the
 Contractors Were
                            Authority's construction and service contracts that contain a
 Monitored
                            labor component. A contractor may comply with Section 3
                            regulations by: (1) hiring and/or training Authority
                            residents; (2) subcontracting or forming a joint venture with
                            a resident owned business; or (3) contributing a
                            predetermined percentage of total labor dollars for
                            construction contracts or a percentage of the total contract
                            amount for service contracts to the Section 3 Educational
                            Fund.

                            The Manager of the Authority's Contract Compliance
                            Section monitored construction and service contracts to
                            ensure the Section 3 requirement was met.           When
                            appropriate employment and training opportunities were not
                            provided, the Authority withheld amounts from the
                            contractors' final payments.

                            We selected ten contracts for review to determine if the
                            contractors were in compliance with the Section 3
                            requirement. Our sample consisted of five contracts over
                            and five contracts under $100,000. We determined that all
                            five contractors with contracts of more than $100,000
                            complied with the Section 3 requirements by hiring
                            Authority residents.

                            The five contractors with contract amounts under $100,000
                            did not hire residents; therefore, the Authority withheld the
                            funds from the contractors’ final payments and put the funds
                            in the Section 3 Educational Fund. Although the Authority
                            withheld amounts from the contractors’ final payments, the
                            Manager of the Contract Compliance Division incorrectly
                            calculated the amounts for four of the five contracts. Two
                            contractors were undercharged $942 and $21, and two


99-CH-201-1801                     Page 104
                                                                          Chapter 18


                         contractors were overcharged $305 and $271.              The
                         Manager could not explain why the errors occurred.

                         The Chicago Housing Authority continued to identify
Partnerships Have Been   agencies to form partnerships to support its resident training
Continuously Developed   and employment programs. Since our last review, the
                         Authority developed 21 new partnerships with public and
                         private agencies, such as the City of Chicago’s Police
                         Department, Urban Merchants Assistance Corporation, J.
                         Jordan Boys and Girls Club, West Side Technical, and
                         Chicago State University.

                         In addition to developing partnerships, the Authority
                         networked with 19 national and 46 local agencies to refer
                         residents to employment opportunities. An example of
                         some of the agencies are: McDonalds, Federal Express,
                         First Chicago Bank, Target, and Stone Container Company.

                         In November 1996, HUD entered into a contract with Abt
Two Resident Surveys     & Associates to conduct two resident surveys at the
Were Completed           Chicago Housing Authority. In December 1996, a resident
                         survey assessing the Authority’s performance in meeting its
                         residents’ needs was completed. A second resident survey
                         was conducted in December 1997 to determine if the
                         Authority had improved its performance. The results of the
                         second survey were presented to the Chicago Housing
                         Authority on June 18, 1998. The report focused on
                         Maintenance/Management, Security Services, and Crime
                         and Disorder.

                         The Chicago Housing Authority did not have an overall plan
                         to address the results of the surveys. However, the Special
                         Assistant to the Deputy Executive Director for Community
                         Relations and Involvement said the survey results would be
                         addressed by the department they related to. We contacted
                         the Authority's Chief of Police to determine if he was aware
                         of the recommendations that related to his area of
                         responsibility and was taking steps to address them.

                         The Chief of Police was familiar with the recommendations
                         that concerned security, and had plans to address them. For
                         example, to ensure resident concerns regarding security are
                         appropriately addressed, the Police Department plans to
                         periodically evaluate crime patterns in the low and high-rise
                         developments. The Department also plans to work with the

                                Page 105                                99-CH-201-1801
Chapter 18


                          local advisory councils and tenant patrols. Currently, the
                          Authority is reviewing its police deployment practices to
                          assign officers at the most critical time when they can be
                          effective.

                          The Chicago Housing Authority did not meet its 1996 goal
 Contract Were Executed   to execute 25 contracts with resident owned businesses.
 With Resident Owned      However, the Authority met its goal for 1997 and was on
 Businesses               track to meet its goal for 1998 to execute $10 million of
                          contracts with resident owned businesses.

                          The Resident Enterprises Section of the Economic
                          Development Division reported that for 1996, the Authority
                          executed a total of 17 contracts with resident owned
                          businesses and resident management corporations.
                          However, when we asked to review the contracts, the
                          Authority could only find nine contracts. The nine contracts
                          totaled $7.2 million.

                          In 1997, the Economic Development Division changed its
                          yearly goal from executing 25 contracts with resident
                          owned businesses to executing $10 million worth of
                          contracts with resident owned businesses. The Authority
                          provided information that showed it had contracting
                          activities totaling $11,298,021 with resident owned
                          businesses and Resident Management Corporations.
                          Therefore, the Authority met its 1997 goal.

                          Our review determined that the Authority had not yet met
                          its 1998 goal, but had contracting activities worth
                          $8,769,886. At its present pace, the Authority should meet
                          its 1998 goal to execute $10 million of contracts with
                          resident owned businesses.

                          According to the Authority’s Diversity Outreach Specialist,
                          contract activities under $25,000 are supported by a
                          purchase order. We reviewed purchase order listings for
                          1996, 1997 and 1998 to verify that purchase orders were
                          used for contracting with resident owned businesses. We
                          determined that purchase orders were used for contracting
                          with resident owned businesses. However, the extent of the
                          activity could not be determined because the listings did not
                          identify which businesses were owned by residents or were
                          resident management corporations. Additionally, we could


99-CH-201-1801                   Page 106
                                                                      Chapter 18


                     not determine when contracts were executed or the initial
                     amount of the contracts from the purchase orders.

                     Although the Authority met its 1997 goal and is on track to
                     meet its 1998, the Economic Development Division did not
                     have a system to track its progress in contracting with
                     resident owned businesses and resident management
                     corporations. A tracking system is needed to ensure that
                     the Authority’s goals are met and economic opportunities
                     are provided for residents.



Auditee Comments     Excerpts from the Authority’s comments follow. Appendix A,
                     page 149, contains the complete text of the comments.

                     Since the audit, Section 3 procedures have been modified.
                     When a contractor requests final pay out and that contractor
                     has not fully complied with Section 3, the gross amount
                     earned by each employee who worked on that project is
                     added to determine the actual labor amount and the Section
                     3 required amount is re-computed. In this way, contractors
                     are not over- or under-charged for compliance.

                     The Authority’s revised procedures should correct the problem
 OIG Evaluation of   of miscalculation of Section 3 withholdings if the procedures
 Auditee Comments    are properly followed.



Auditee Comments     The Purchasing and Contracts Department’s Creative
                     Computer Solutions system is the computerized database
                     that tracks all contracts/purchase orders for the Authority.
                     All original, fully executed contracts are stored in the files
                     of this department. In 1996, the Authority contracted
                     $8,639,184.90 with 16 Resident Owned Businesses,
                     Resident Management Corporations, or resident
                     organizations.      These contracts included Custodial
                     contracts, Laundry Licensing Agreements, Printing, and
                     Service and Management contracts.

                     At the time of our review, the Purchasing and Contracts
 OIG Evaluation of   Department could only provide nine contracts with resident
 Auditee Comments    owned businesses and resident management corporations
                     for 1996. The Authority did not provide any additional
                     contracts with its comments; however, it did provide
                     additional documents that were not available at the time of

                            Page 107                                99-CH-201-1801
Chapter 18


                     our review. The documents included a Minority Vendor
                     Purchase Order list and five documents that identified
                     various resident owned businesses and resident management
                     corporations. The documents support that the Authority
                     had five additional contracts to those provided to us at the
                     time of the review. The Authority’s goal was to contract
                     with 25 resident owned businesses and resident management
                     corporations.



Auditee Comments     A report from Purchasing and Contracts Creative Computer
                     Solutions tracking system lists 37 Resident Owned
                     Businesses contracting activity for 1997 which exceeds $12
                     million.

                     Our review of the report the Authority provided with its
 OIG Evaluation of   comments, Minority Vendor Purchase Order list, coupled
 Auditee Comments    with five documents that identified various resident owned
                     businesses and resident management corporations showed
                     that the Authority had contracting activity of $11,298,021
                     with resident owned businesses and resident management
                     corporations. Our total differs from the Authority’s
                     amount.     We eliminated the amounts the Authority
                     highlighted for organizations that were not on the lists of
                     resident owned businesses and resident management
                     corporations provided by the Authority with its comments.
                     We adjusted our finding to show the Authority met its 1997
                     goal.



Auditee Comments     A report from Purchasing and Contracts Creative Computer
                     Solutions tracking system lists 35 Resident Owned
                     Businesses contracting activity for 1998 and exceeds $17
                     million dollars (see attached).

                     Our review of the Minority Vendor Purchase Order list
 OIG Evaluation of   report provided by the Authority with its comments,
 Auditee Comments    coupled with five documents that identified various resident
                     owned businesses and resident management corporations,
                     showed the Authority had contracting activity of
                     $8,769,886 with resident owned businesses and resident
                     management corporations. Our total differs from the
                     Authority’s amount. We eliminated the amounts the
                     Authority highlighted for organizations that were not on the
                     lists of resident owned businesses and resident management

99-CH-201-1801              Page 108
                                                                     Chapter 18


                     corporations provided by the Authority with its comments.
                     The Authority has not met its 1998 goal; however, based on
                     the additional information provided, it appears it will. We
                     adjusted our finding to show the Authority should meet its
                     1998 goal.




Auditee Comments     At present, the Creative Computer Solutions System does
                     not identify which companies fall under the category of a
                     resident    owned    business,   Resident    Management
                     Corporation or resident organization. It also does not
                     identify subcontractors or dual management agreements.
                     We are taking steps to add a new field in the system that
                     would do so.

                     The Economic Development Division hired Mr. Marty
                     Melinger from the Chicago Housing Authority Inspector
                     General's office to conduct audits and tracking of resident
                     owned businesses and Resident Management Corporation
                     contracts. Prior to Mr. Melinger's hiring in March of 1998,
                     we relied upon the Diversity Outreach Specialist and our in-
                     house database to track all resident owned businesses,
                     Resident management corporations and minority contracting
                     Authority-wide via the Creative Computer Solutions
                     system. Mr. Melinger was brought on board specifically to
                     address contracts secured by resident owned businesses,
                     Resident management corporations and resident
                     organizations in an effort to develop a system that will
                     report tracking activities monthly. The first draft document
                     is scheduled to be published in November, and is expected
                     to become a standard attachment to the Authority’s monthly
                     activity report.

                     When fully implemented, the Authority’s planned actions
 OIG Evaluation of   should provide the Authority with a system to track its
 Auditee Comments    progress in contracting with resident owned businesses and
                     resident management corporations.



Auditee Comments     The Auditor was provided with a current list of 108
                     certified Resident Owned Businesses that is included for
                     your review. That list should have been cross-referenced
                     with the minority vendor listing to determine how many


                            Page 109                              99-CH-201-1801
Chapter 18


                     purchase orders were used for contracting with resident
                     owned businesses and Resident management corporations.

                     All the attached information was made readily available to
                     the auditor as requested.

                     We had the list of certified Resident Owned Businesses during
 OIG Evaluation of   our review. However, we were first provided the Minority
 Auditee Comments    Vendor Purchase Order list with management’s comments.
                     Therefore we were unable to make the comparison the
                     Economic Development Division suggested. The Economic
                     Development Division, which is responsible for the program,
                     did not have any documentation to show the status of the
                     goals. They referred us to the Purchasing and Contracts
                     Department for support. The Economic Development Division
                     did not have a system to track contracting with resident owned
                     businesses and resident management corporations.

                     The Authority did not provide comments regarding the actions
                     it plans to take to ensure the problems reported in the June 18,
                     1998 resident survey are adequately addressed.


 Recommendations     We recommend that the Director of Public Housing, Illinois
                     State Office, assures that the Chicago Housing Authority:

                     18A.   Ensures applicable Divisions take appropriate actions
                            to address the problems identified in the June 18, 1998
                            resident survey.

                     18B.   Develops and implements controls to ensure the
                            appropriate Section 3 amounts are withheld from the
                            final contract payment.

                     18C.   Develops a method to assess its progress in
                            contracting with resident owned businesses and
                            resident management corporations to ensure its
                            yearly goals are met.




99-CH-201-1801               Page 110
                                                                                   Chapter 19


                   Alternative Funding Sources
The OIG review dated September 30, 1996 reported that the Authority was aggressively pursuing
funding from sources outside of HUD and had created a Grant Administration Department to
pursue funding. Additionally, the Authority was developing partnerships with public and private
developers for the redevelopment of its housing stock. We recommended that HUD assure that
the Authority continue to pursue alternative funding sources and housing opportunities with
public and private developers.


                                    The Authority established procedures to identify alternative
 Observations
                                    funding; aggressively pursued alternative funding sources;
                                    and continued to pursue housing opportunities with public
                                    and private developers.

                                    The Authority aggressively pursued alternative funding
 The Authority Pursued
                                    sources since our last review. The Grant Administration
 Alternative Funding
                                    Department is responsible for researching and identifying
 Sources
                                    sources of potential funding and completes funding
                                    applications.

                                    The Grant Administration Department maintained a list of
                                    51 Internet sites to search for funding. Additionally, the
                                    Department received monthly and quarterly publications and
                                    had a reference library. The reference library contained
                                    guides to funding sources such as: The Foundation Grants
                                    Index; National Directory of Corporate Giving; and Sources
                                    of Operating Grants. The Grant Department used the
                                    sources as well the news media to identify funding
                                    opportunities.

                                    The Department continued to apply for funds from various
                                    Federal, State, City, and private sources including: the
                                    Department of Labor; the Department of Justice; Illinois
                                    Attorney General; City of Chicago’s Department of
                                    Planning and Development; the Mayor’s Office of
                                    Employment and Training; Illinois Department of Natural
                                    Resources; Center for Disease Control; Illinois State Board
                                    of Education; Illinois Department of Human Services; and
                                    private foundations. The following table summarizes grants
                                    applied for and received in 1996, 1997 and 1998 from non-
                                    HUD sources.

                                            No. Grants     No. Grants           Funding

                                           Page 111                              99-CH-201-1801
Chapter 19


                         Year      Applied For        Received       Amount
                           1996                  13              6    $    507,000
                           1997                  33          19        10,159,809
                           1998                  25          11           1,738,245
                          Totals                 71          36       $12,405,054


                         Additionally, the Authority has four 1997 and ten 1998
                         grant applications that are awaiting approval by the
                         awarding agencies. The amount of the grant requests total
                         $345,000 and $5,824,005 respectively.

                         The Authority also explored alternate methods of funding
                         programs.     In late 1997, the Grant Administration
                         Department formed six committees to develop alternative
                         funding methods. The committees suggested various
                         methods the Authority could use to raise additional funds.
                         For example, one suggestion was to seek contributions from
                         the Authority's staff for summer youth programs. The
                         suggestion was implemented and as of September 18, 1998,
                         raised approximately $233,000 for youth programs.

                         The Authority continued to pursue housing opportunities
 The Authority Pursued
                         with public and private developers. In June 1997, the
 Opportunities With
                         Authority submitted a revised Revitalization Plan to HUD
 Developers
                         using the 1994 HOPE VI grant for the redevelopment of the
                         Cabrini Green Extension.       The plan identified four
                         developers who were constructing a combination of market
                         rate and replacement units for long term lease by the
                         Authority. As of September 1998, the Authority was
                         finalizing negotiations with two developers for the long
                         term lease of units.

                         The plan includes the redevelopment of City and Chicago
                         Housing Authority land. Demolition of existing structures
                         is scheduled to begin in March 1999 and be completed in
                         June 999. Development partners are planned to be selected
                         by the end of 2000.




99-CH-201-1801                     Page 112
                                                                   Chapter 19


                   Excerpts from the Authority’s comments follow. Appendix A,
Auditee Comments   page 155, contains the complete text of the comments.

                   The Chicago Housing Authority concurs with the observations
                   described relative to your review of our effort to secure
                   alternative funding sources.


 Recommendations   Based on the actions the Authority has taken, no additional
                   recommendations are necessary.




                         Page 113                              99-CH-201-1801
Chapter 19




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99-CH-201-1801                  Page 114
                                                                                       Chapter 20


                              Section 8 Program
The OIG review dated September 30, 1996 found that past reviews by the Authority’s Inspector
General and independent public accountants determined that the Authority’s Section 8 Program
had many problems. For example, waiting lists were not reliable and staff lacked knowledge of
Section 8 requirements. As a result of the operating problems, the Authority contracted with
Quadel Consulting Corporation to operate the Section 8 Program. We reviewed Quadel’s initial
operation of the Program and found that the contractor: did not have a computerized system that
coordinated occupancy and inspection activities to provide accurate annual recertification
information; needed to improve the accuracy of its calculation of tenant contributions and
Housing Quality Standards inspections; and did not have a sufficient number of computer
terminals to effectively operate the Section 8 Program. Also, the Authority’s Memorandum of
Agreement did not include a strategy to assess the effectiveness of contracting out the Section 8
Program.

We recommended that HUD assure that the Authority: (1) verify that the contractor developed a
method to produce an accurate recertification report; (2) ensure the contractor continued to track
its quality control reviews and implement appropriate actions to reduce its error rates; (3) verify
that the contractor received and installed 35 computers; (4) ensure the contractor fully trained its
staff on the computers; and (5) amend the Memorandum of Agreement to add a strategy to assess
the effectiveness of contracting out the Section 8 Program.


                                      HUD selected Quadel Consulting Corporation to operate
 Observations                         the Authority’s Section 8 Program. Quadel created a
                                      separate corporation called CHAC Inc. to operate the
                                      Program. The contract began on December 1, 1995 and
                                      was extended to March 2000.

                                      As of September 3, 1998, the Authority ensured that CHAC
                                      implemented three of the five recommendations from our
                                      previous review and partially implemented one
                                      recommendation. CHAC developed a method to produce
                                      an accurate recertification report. CHAC installed 173
                                      computers and trained all but its new staff on the
                                      computers. Although CHAC tracked its quality control
                                      reviews, it only partially reduced its error rate for
                                      calculation of tenant contributions. The Authority did not
                                      amend its Memorandum of Agreement with HUD to add a
                                      strategy to assess the effectiveness of contracting out the
                                      Section 8 Program.

                                      CHAC developed a method to produce an accurate
 A Method Was Developed               recertification report. In our previous review, we noted that

                                              Page 115                               99-CH-201-1801
Chapter 20


                            CHAC was unable to produce a report that integrated the
                            Memory Lane system that tracks the annual reexaminations
                            and the M-track system that tracks the inspection
                            information. Since our previous review, CHAC hired a
                            computer consultant to design a report that integrates both
                            systems. We reviewed the report and found that it
                            adequately integrates all the information into one format.

                            As reported in our previous review, CHAC has continued to
 CHAC Partially Reduced     track its quality control reviews and address errors with its
 Its Error Rates            staff. However, CHAC only partially reduced the error
                            rates. According to the Section 8 Contract, CHAC’s
                            performance allows for no more than: (1) a five percent
                            error rate in the calculation of tenant contributions; and (2)
                            a ten percent error rate on unit inspections. An inspection
                            error occurs when a unit is reinspected within two months
                            and is found to have Housing Quality Standards violations
                            that may have existed at the time of the previous inspection.

                            In our previous report, we noted that CHAC exceeded the
                            contracted error rates by approximately 20 percent for both
                            calculation of tenant contributions and inspections. We
                            reviewed the error rates for calculation of tenant
                            contributions and inspections between April 1997 and June
                            1998. CHAC met the error rate for inspections; however,
                            the error rate for tenant contributions exceeded the contract
                            requirement by approximately 15 percent.

                            The Director of CHAC Administration said that errors,
                            when detected and reported, are required to be corrected.
                            The Director said he believes that error rates on calculations
                            of tenant contributions have not fallen sufficiently because
                            previously, employees either had a lack of care or
                            understanding. Since our last review, in an effort to
                            improve its tenant contribution error rates, CHAC provided
                            quality control training to all housing specialists. Also,
                            CHAC provides quality control training for all new
                            employees within two months of hire. As of December 31,
                            1998, CHAC will take disciplinary action against any
                            experienced employee whose error rate is not at or below
                            the contract error rate. New employees will be given six
                            months and additional training as necessary before
                            disciplinary actions are taken.
                            At the time of our previous review, CHAC had only 10
 Computers Were Installed   computers to serve a staff of 46. We determined that 10
 And Staff Were Trained
99-CH-201-1801                     Page 116
                                                                            Chapter 20


                            computers were not sufficient to effectively operate the
                            Section 8 program. Since that time, CHAC’s staff has
                            grown to 185; however, CHAC now has 173 computers for
                            its staff. The 173 computers are sufficient for the staff to
                            effectively manage the Section 8 program.

                            CHAC has trained all of its staff on its computer software
                            except for 21 new staff members. The Administrative
                            Assistant to the Director of CHAC projected that the new
                            staff will be trained by March 31, 1999. Depending on the
                            needs of the position, CHAC staff have been trained on
                            Word, Excel, Access, Memory Lane, and MTRAC
                            software.

                            The Authority did not amend its Memorandum of
 The Authority Did Not      Agreement with HUD to add a strategy to assess the
 Assess The Effectiveness   effectiveness of contracting out the Section 8 Program.
 Of Contracting Out The     Consequently, a formal assessment of the effectiveness of
 Section 8 Program          the CHAC contract has never been performed. An overall
                            assessment is important to provide assurance that the
                            program is being effectively managed and that necessary
                            adjustments are made. We believe that a formal assessment
                            needs to be performed before the Section 8 contract is
                            renewed in April 2000.


                            Excerpts from the Authority’s comments follow. Appendix A,
Auditee Comments            page 166, contains the complete text of the comments.

                            On the first page, a reference is made to the OIG review
                            dated September 30, 1996. This may be an error since the
                            problems noted were prior to CHAC's administration of the
                            program beginning in December 1995.

                            CHAC has addressed the recommendation related to the
                            reduction of the error rate on the calculation of tenant
                            contributions by revising their procedures to comply with
                            the contract.

                            In the case of the Total Tenant Payment, error rates are way
                            down since the removal of the effect of compounding
                            errors, which was done retroactively to April 1998. Before
                            the retroactive adjustment, error rates for April and May
                            were 18 percent and 15 percent respectively. After the
                            adjustment, they dropped to two percent and zero percent

                                   Page 117                              99-CH-201-1801
Chapter 20


                     respectively. June’s error rate was two percent and July’s
                     was zero percent.

                     The Authority plans to issue a Request for Proposal in 1999
                     for a contractor to thoroughly research and collect data on
                     CHAC's administration of the program. The Request for
                     Proposal will require the contractor to develop a
                     benchmarking methodology to “artificially” create a way to
                     measure what CHAC has accomplished against a reasonable
                     standard. In addition the contractor will compare CHAC’s
                     program costs to other programs around the country
                     adjusting for size and local economic differences.


                     The audit period of our previous review was June 1995
 OIG Evaluation of   through May 1996. Our review included the period of time
 Auditee Comments    when the Authority managed the Section 8 program.

                     The Authority said CHAC has taken action that reduced the
                     error rate for the Total Tenant Payment calculation (calculation
                     of tenant contributions); however, they did not provide the
                     revised procedures or support that the error rates were
                     reduced.

                     The Authority’s plan to have a contractor evaluate the
                     effectiveness of contracting out the Section 8 Program will
                     satisfy our recommendation if the plan is completed.


 Recommendations     We recommend that the Director of Public Housing, Illinois
                     State Office, assures that the Chicago Housing Authority:

                     20A.   Requires CHAC to establish procedures and controls
                            to reduce the error rate on the calculation of tenant
                            contributions to the level permitted by the contract.

                     20B.   Formally assesses the efficiency and effectiveness of
                            the CHAC contract before the contract is renewed in
                            April 2000.




99-CH-201-1801               Page 118
                                                                                    Chapter 21


                 The Authority Lacked Controls
                  Over Its HOPE VI Program
Since our previous review, the Authority’s Inspector General determined that the Authority
expended HOPE VI funds for two self sufficiency programs that did not achieve program
objectives. The Inspector General reviewed contract compliance for individual self sufficiency
programs, but did not assess whether the Authority had adequate controls to ensure objectives of
the HOPE VI program were met. As a result, as part of this review, we assessed the adequacy of
the Authority’s internal controls over the HOPE VI self sufficiency programs and construction
activities that ensure program goals and objectives were met. We found that the Authority did
not have an adequate system of controls to ensure that projects funded by HOPE VI achieved
their program goals.


                                    The Housing Authority was awarded five HOPE VI grants
 The Housing Authority
                                    for fiscal years 1994, 1995 and 1996. The 1994 grants for
 Was Awarded Five
                                    the Cabrini Homes Extension totaled $40 million for
 Hope VI Grants
                                    revitalization of distressed public housing, and $10 million
                                    for self sufficiency programs. The 1995 grant totaled
                                    $400,000 and was for planning revitalization efforts for the
                                    Robert Taylor, Brooks Extension, Henry Horner, and
                                    Rockwell Gardens Developments. In 1996, the Authority
                                    received grants of $66,418,550 for revitalization of
                                    distressed public housing at the Robert Taylor, Brooks
                                    Extension, and Henry Horner developments, and $1.5
                                    million for self sufficiency programs at the Robert Taylor
                                    development. The Authority has expended $7,988,285 of
                                    the 1994 Cabrini Homes Extension grants of which
                                    approximately $6,624,229 was spent on self sufficiency
                                    programs. The Authority also spent the 1995 planning
                                    grant.

                                    The Authority’s HOPE VI program includes:
                                    implementation of self sufficiency programs, building
                                    demolition, rehabilitation and development of replacement
                                    housing. The Authority’s Office of Community Relations
                                    and Involvement is responsible for operating and monitoring
                                    the Authority’s HOPE VI self sufficiency programs. The
                                    Office of Operations is responsible for the demolition,
                                    rehabilitation and development of replacement housing
                                    programs.



                                        Page 119                                 99-CH-201-1801
Chapter 21


                             The Office of Community Relations and Involvement is
 The Office Of Community
                             made up of eight divisions. Six of the eight divisions
 Relations And
                             participate in the management, operation or monitoring of
 Involvement Oversees Self
                             HOPE VI self sufficiency programs. The Development
 Sufficiency Programs
                             Initiatives Division is responsible for program reporting. It
                             reports all program accomplishments to Authority
                             management and HUD. The Grant Administration Division
                             is responsible for monitoring the Authority’s HOPE VI self
                             sufficiency programs.

                             We determined the Office of Community Relations and
                             Involvement had various reports and procedures that could
                             ensure programs funded by HOPE VI were meeting their
                             goals; however, the reports were not always consistent or
                             effectively used, and the procedures were not adequately
                             followed. As a result, HUD and the Authority lack
                             assurance that HOPE VI programs will achieve their goals.

                             The Authority’s Inspector General issued reports on two of
                             the Authority’s self sufficiency programs: Cabrini Textile
                             Works and CHA Works. The reports showed that the
                             overall goals and objectives of the programs were not met.

                             The Office of Community Relations and Involvement needs
                             to develop policies and procedures to ensure accurate
                             reporting and monitoring of programs funded by HOPE VI.
                             Responsibility for reporting and monitoring needs to include
                             procedures that assure proper interface and coordination
                             between divisions.

                             The Development Initiatives Division had reporting
 The Development             mechanisms in place that could have been used to evaluate
 Initiatives Division        whether self sufficiency program objectives were met. The
 Reports On Self             mechanisms consisted of: (1) monthly and annual program
 Sufficiency Programs        progress reports prepared by the Divisions responsible for
                             particular programs; (2) quarterly reports prepared for
                             HUD; (3) development of annual work plans that identified
                             program goals and objectives for the year; and (4)
                             preparation of Management By Objective Reports
                             comparing monthly accomplishments with the annual work
                             plan goals. However, the mechanisms were not always used
                             to evaluate the program and the information was not
                             verified. The Division did not have written policies and
                             procedures to ensure the program goals and objectives were
                             met for HOPE VI self sufficiency programs.

99-CH-201-1801                      Page 120
                                                 Chapter 21


Monthly, Quarterly and Annual Reports. Division
Directors prepared and submitted monthly and annual
narrative program progress reports to the Office of
Community Relations and Involvement. The reports were
made available to the Development Initiatives Division to
use for the Division’s reporting requirements. The report
information was not verified or reviewed by the
Development Initiatives Division to ensure its accuracy and
completeness.     The unverified reports were used by
Development Initiatives staff to prepare the monthly
summary reports submitted to Authority management and
quarterly progress reports submitted to HUD.

We compared all monthly summary reports prepared by the
Development Initiatives staff to the narrative reports
submitted by the Divisions. Additionally, we compared the
quarterly reports submitted to HUD to the monthly
narrative reports.    The information contained in the
summary and quarterly reports was not supported by the
monthly narrative reports prepared by the Divisions. We
were unable to determine the basis of the information
reported by the Development Initiatives staff. The staff said
the information contained in the reports was prepared from
the information submitted by the Divisions.

The Director of the Development Initiatives Division
indicated the reports were used to ensure the goals and
objectives of the programs were achieved. However the
reports prepared by the Divisions and the Development
Initiatives staff did not include information concerning the
Authority’s progress toward meeting the programs’
objectives. Since the reports did not contain information on
program progress, the reports were not an effective control
to ensure program goals and objectives were achieved.

Annual Work Plans. The Divisions prepared annual work
plans for their programs that identified the program goals
and objectives to be accomplished during the year. The
work plans were approved by the Division Director and the
Director of Development Initiatives. However, there were
no procedures to ensure that the plan objectives correlated
to or would accomplish the HOPE VI program objectives.

We reviewed four work plans to determine if the goals and
program objectives identified in the HOPE VI grant

       Page 121                               99-CH-201-1801
Chapter 21


                            documents were included in the work plans.               We
                            determined that the four work plans did not contain all
                            program objectives. For example, the Step-Up/Chicago
                            Housing Authority Works' HOPE VI program objectives
                            were to train residents in basic construction and obtain
                            union apprentice positions. The 1997 work plan goals for
                            the program did not include obtaining union apprenticeships
                            for the residents. Since all objectives were not included in
                            the annual work plans, progress towards meeting those
                            objectives was not monitored, thereby rendering no
                            assurance that all program objectives were met.

                            Management By Objective Reports. Each Division
                            prepared monthly Management By Objective Reports for
                            the Deputy Executive Director of the Office of Community
                            Relations and Involvement. The reports showed progress
                            on accomplishment of the goals established in each
                            program’s annual work plan. However the Development
                            Initiatives Divisions’ staff did not receive copies of the
                            report from the other Divisions. The Management By
                            Objective Reports could be a valuable tool to provide
                            assurance over the accuracy of reported information and
                            progress toward meeting program objectives.

                            The Grant Administration Division was responsible for
 The Grant Administration
                            monitoring the Authority’s HOPE VI self sufficiency
 Division Monitors Self
                            programs. Grant Administration’s policies and procedures
 Sufficiency Programs
                            required that semiannual monitoring visits be conducted for
                            all programs.

                            We selected four HOPE VI programs to determine if the
                            Grant Administration Division monitored the programs and
                            to assess the adequacy of the monitoring reviews. We
                            reviewed the monitoring reports and supporting workpapers
                            for all reviews completed during 1997 and 1998 for CHA
                            Works, Cabrini Textile Works, Victim Assistance, and
                            Project Peace.

                            We found the Grant Administration Division did not
                            adequately monitor the programs. The reviewers did not
                            always follow Grant Administration’s monitoring
                            procedures. The monitoring procedures required staff to
                            interview service recipients during the semiannual site visits.
                            We determined that reviewers did not always interview
                            program participants. For example, during monitoring

99-CH-201-1801                      Page 122
                                                                            Chapter 21


                           reviews of the CHA Works program, the reviewer did not
                           interview resident participants to verify that the residents
                           received training.

                           The Authority’s Inspector General determined that 15 of 50
                           training participants did not pass all required courses;
                           however, 11 of the 15 participants nonetheless received
                           certificates of completion. The Inspector General also
                           interviewed nine participants and determined the training did
                           not provide the necessary skills for a construction industry
                           job. We believe if the Grant Administration Division had
                           followed its established monitoring procedures, which
                           include interviews of program participants, it would have
                           concluded the training objective was not met.

                           The Grant Administration Division did not always have
                           consistent conclusions throughout its reviews. For example,
                           in the February 13, 1998 monitoring review for Cabrini
                           Textile Works, the reviewer concluded in one part of the
                           review that progress was being made to recruit and train
                           program participants. The reviewer reported that she could
                           not make a determination if the goal would be met.
                           However, in another part of the review, the reviewer
                           reported that the goal would not be met. As a result, the
                           Authority lacked assurance about the correct status of the
                           goal.

                           The Redevelopment Division, within the Authority’s Office
The Office Of Operations
                           of Operations, manages all HOPE VI construction activities.
Is Responsible For
                           This includes building demolition, rehabilitation, and the
Programs Involving
                           development of replacement housing. Program grantees are
Demolition And
                           required to comply with the terms and conditions outlined in
Construction Activities
                           their grant agreement and revitalization plans approved by
                           HUD.

                           The Redevelopment Division established controls to ensure
                           that HOPE VI program goals and objectives were met for
                           redevelopment projects. However, written procedures were
                           not developed for the system of controls. The controls
                           were: centralization of authority for each individual HOPE
                           VI grant; and preparation of monthly progress reports to
                           Authority management and quarterly reports to HUD.

                           Centralization of Authority. Each HOPE VI grant is
                           assigned to a project manager whose sole function is to

                                  Page 123                               99-CH-201-1801
Chapter 21


                   ensure the grants’ revitalization plans are implemented. The
                   Director of Redevelopment and his HOPE VI Manager
                   oversee the project managers assigned to each revitalization
                   plan.

                   Monthly Progress Reports. The Redevelopment Division
                   prepares monthly HOPE VI progress reports for Authority
                   management. The reports include a comparison of program
                   accomplishments to revitalization plan goals. We reviewed
                   the monthly progress reports and found the reports were
                   detailed, identified problems experienced, and included all
                   activities and goals in the revitalization plan. All activities
                   shown in the monthly reports were consistent with the
                   revitalization plans.

                   Quarterly Reports. The Redevelopment Division also
                   prepares quarterly reports for HUD. We reviewed the
                   quarterly reports to determine if the information reported
                   was consistent with the goals and objectives of the
                   revitalization plans and the information reported in the
                   monthly progress reports. The quarterly reports contained
                   budget and narrative information that was consistent with
                   revitalization plans and the monthly progress reports.

                   We selectively reviewed information contained in the
                   reports and found that it was accurate. We believe the
                   Authority’s centralization of authority for each grant, along
                   with the monthly progress and quarterly reports, form a
                   sound basis for an effective system to provide assurance that
                   HOPE VI funds spent for redevelopment programs will
                   meet program goals and objectives.            However, the
                   procedures need to be in writing to ensure they are
                   consistently applied.


                   Excerpts from the Authority’s comments follow. Appendix A,
Auditee Comments   pages 172 and 175, contains the complete text of the
                   comments.

                   The Development Initiatives Division will create a policies
                   and procedures manual for the implementation and
                   operation of HOPE VI Self-sufficiency programs. The
                   Division will conduct a training session with all departments
                   responsible for program implementation.


99-CH-201-1801             Page 124
                                                                          Chapter 21


                     The Development Initiatives Division will ensure that all
                     HOPE VI program goals are included in a separate category
                     of the Management by Objectives report for each
                     Department or Division engaged in HOPE VI. The
                     Assistant Executive Director will review all HOPE VI
                     Management By Objectives for compliance.

                     Hope VI Self-Sufficiency project staff will complete weekly
                     status reports for submission to the HOPE VI Program
                     Coordinator. Project staff will maintain individual client
                     files on each program participant that includes a client
                     profile and program progress checklist.

                     The Development Initiatives Director will ensure that the
                     Community Redevelopment Department hires and trains
                     HOPE VI Program Coordinators. Program Coordinators
                     will have responsibility for the weekly monitoring and
                     documentation of HOPE VI Self-Sufficiency Programs.
                     Additionally, Program Coordinators will review project staff
                     monthly activity reports, conduct bi-monthly file reviews
                     and prepare monthly program progress reports on each self-
                     sufficiency project activity.

                     The Authority’s planned actions should correct the
 OIG Evaluation of   problems related to reporting of self-sufficiency program
 Auditee Comments    progress if the actions are followed through to completion.


                     The Chicago Housing Authority Department of Grant
Auditee Comments     Administration Policies and Procedures (from June 1996 to
                     present) do not stipulate that service recipients are to be
                     interviewed during the semi-annual site visit.

                     We used the Grant Administration Department’s policy and
 OIG Evaluation of   procedures, Program Monitoring for Semi-annual Site Visits
 Auditee Comments    dated July 23, 1996. The procedures state the Grant
                     Administrator will interview program administrative and fiscal
                     staff and service recipients during site visits. The Authority did
                     not provide any evidence to show the procedure has been
                     changed.


                     The Grant Administrator did many things to determine the
Auditee Comments     program’s compliance with its objective. The Grant
                     Administrator noted that CHA Works documented its

                            Page 125                                   99-CH-201-1801
Chapter 21


                     efforts via individual participant files, participant rosters,
                     and participant evaluations, but failed to maintain
                     documentation in individual participant files on classroom
                     instruction. It was therefore noted in the site visit report
                     that copies of certificates were not maintained in program
                     files.

 OIG Evaluation of   The Authority provided documentation with its comments that
 Auditee Comments    showed the Grant Administration reviewer evaluated
                     documentation in addition to relying on the Program Managers
                     statement. We deleted the portion of our observation that
                     related to the reliance on unverified statements. However, the
                     reviewer failed to identify the program’s noncompliance with
                     its objectives. As a result, problems were not addressed and
                     corrected.


                     The Grant Administrator did not state anywhere in the In-
Auditee Comments     depth Site Visit Report for Cabrini Textile Works that
                     progress was being made to recruit and train program
                     participants. The Grant Administrator was consistent in
                     marking "unable to make determination" under the No or
                     Non-Compliant columns for the programmatic assessment
                     related to recruiting and training of the Cabrini Textile
                     Works participants.

 OIG Evaluation of   In the Cabrini Textile Works Site Visit Report programmatic
                     assessment section, the reviewer said she evidenced eight
 Auditee Comments
                     names on the time sheets and according to the program
                     manager, 25 residents were recruited and participated in the
                     training since August 1996. This indicated progress was being
                     made toward the objective to recruit and train 10 to 100
                     residents. The reviewer concluded that she could not make a
                     determination if the goal of the program would be met. In the
                     narrative summary of Site Visit Findings and
                     Recommendations, the reviewer said the program was not able
                     to recruit the number of program participants projected. In
                     another portion of the summary, she again concluded she could
                     not determine if the 1997 program objective would be met.
                     Since the program’s objective was the recruitment of trainees
                     and the site visit was accomplished on February 13, 1998, it
                     appears the objective was not met. The Authority lacks
                     assurance as to the correct status of the program’s objective.




99-CH-201-1801              Page 126
                                                                         Chapter 21


                     As an additional mechanism for program discrepancies, the
Auditee Comments     Department of Grant Administration drafted an Unresolved
                     Site Visit Finding report detailing all unresolved findings in
                     April 1998. Grant Administrators were required to meet
                     with the responsible program staff to address the unresolved
                     findings. This would ensure that site visit findings would be
                     resolved timely.

 OIG Evaluation of   The focus of the Unresolved Site Visit Finding Report was to
                     ensure findings resulting from site visits were resolved. Our
 Auditee Comments
                     observation determined that the site visits did not adequately
                     identify all problems that could keep a program from meeting
                     its goals and objectives. If a problem is not identified, then it
                     will not appear on the Unresolved Site Visit Finding Report.
                     The Authority has monitoring procedures that should ensure
                     program goals and objectives are met, it needs to follow the
                     procedures.


                     Grant Administration is currently in the process of
Auditee Comments     developing a corrective action plan to address the issues of
                     the HUD auditor. This plan will be developed and
                     implemented by Grant Administration within the next 60
                     days.

 OIG Evaluation of   The Authority indicated it is developing a corrective action
                     plan; however, it did not provide the specifics of the plan.
 Auditee Comments
                     The Authority did not provide comments that addressed the
                     need for written procedures to ensure the system of controls
                     over the redevelopment programs is consistently and effectively
                     applied.




 Recommendations     We recommend that the Director of Public Housing, Illinois
                     State Office, assures that the Chicago Housing Authority:

                     21A.    Develops policies and procedures to ensure accurate
                             reporting of self sufficiency program progress.

                     21B.    Follows its monitoring procedures.

                            Page 127                                  99-CH-201-1801
Chapter 21



                 21C.   Develops written procedures to ensure the system of
                        controls over redevelopment programs is
                        consistently and effectively applied.




99-CH-201-1801          Page 128
                                                                                            Appendix A


Auditee Comments
                        The Chicago Housing Authority
June 26, 1998

Richard Urbanowski
Senior Auditor
Department of Housing and Urban Development
Office of Inspector General
77 W. Jackson Blvd., Suite 2646
Chicago, Illinois 60604-3507

Dear Mr. Urbanowski:

This letter is in response to the Management Information System Audit
recommendation memo dated June 19, 1998.

Recommendation
13A -Convert the tenant accounting, housing eligibility, work orders and fixed assets
 accounting modules to the updated Creative Computer Solutions' versions by July 31,
1999.

Response
As stated in the report, CCS has given release dates of 10/01/98 for 3 of the modules
 and 1/l/99 for Fixed Assets. It is our intention to convert our modules within a
reasonable time frame after the actual release of the package. We will be conducting
extensive testing of each module and it's relationship with the rest of the packages. It
has been our experience in the past that the software does not ship initially without
problems. We do NOT want to be a beta test sight for the new release of these
modules the way we were with our initial purchase of CCS.

It is in the best interest of the Chicago Housing Authority to not only convert/upgrade
to CCS's current releases of their software, but also to insure that we have a workable
system when it is done.

All of this will impact the date that we have a fully updated system. Because of all
 these intangibles, we do not feel comfortable at this time committing to a July 31,
1999 deadline. However, we will commit to beginning the implementation six (6)
months after each of the module release dates.

Sincerely,

Carmen Browne
(Acting) Deputy Executive Director
 Finance & Administration

             626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8956

                                               Page 129                                    99-CH-201-1801
Appendix A


                       CHICAGO HOUSING AUTHORITY


June 26, 1998

Mr. Richard Urbanowski
Senior Auditor
U.S. Department of Housing and Urban Development
Office of Inspector General for Audit, Midwest
77 West Jackson Boulevard
Room 2646
Chicago, Illinois 60604

Dear Mr. Urbanowski:

I took command of the Chicago Housing Authority Police Department on
December 3, 1996.          Our activities have been focused on addressing HUD's
Corrective Action Order (CAO), which was issued a month after these
recommendations were made, and implementing HUD's blueprint plan.              I was
never informed of the OIG Review dated September 30, 1996, The Report
Assessment of Progress.          However, our Authority Management Report (AMR)
and our individual initiatives address all of the issues that are in the OIG Review.
The four (4) items listed in the security section of the OIG Review either have
been or are being addressed. I believe the issue at hand is our preparation, in the
future, is a more detailed report that relates to the format based upon this OIG
Report.    We understand and will comply with the appropriate format.         If your
preference is the Objective-Criteria-Target- Date format recently introduced to us,
we will use it.       We utilize the Authority Management Report (AMR) for our
performance evaluation system.        We shall use a more classical police productivity
performance   measurement        system  that   will  measure    direct  and   indirect
performance measures to include:

Direct-hard measures, e.g, crime rates, criminal victimization, ability of the public
to undertake routine activities, real estate values, commercial activities and
number of disorderly situations interrupted, the number of community problems
solved, and information volunteered to the police about crimes.

Direct-soft measures, e.g., fear of crime, confidence in the police, commitment to
the neighborhood, satisfaction of the police, complaints about police service,
willingness to assist the police, community solidarity.



  626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - Telephone (312) 791-8500
Mr. Richard Urbanowski

99-CH-201-1801                          Page 130
                                                                                      Appendix A


Page 2
June 26, 1998

Indirect measures, e.g., number of police officers, number of uniform officers on the street,
proportion of civilian dress officers to uniform officers, ratio to supervisors to police officers,
response time, arrests, clear up rates, number of community crime prevention meetings,
number of watch groups, speed in answering telephones.

I would like to respond to those statements that you made in the observation section of the
review.

OBSERVATIONS - The Authority did not develop procedures and controls to
establish and evaluate performance measures for each security initiative undertaken.

RESPONSE - We disagree. The information is indicated in the AMR. We shall,
however, be more detailed and site-based for each initiative development by
development in a future report. Performance measures will be implemented for all
security initiatives.

OBSERVATION: The Authority also did not develop an overall site-based security plan
for Cabrini Green, Ida B. Wells, Altgeld Gardens, and ABLA Homes, nor for any of
its other developments, although it did develop a physical security plan for the Cabrini
Green and ABLA Homes.

RESPONSE: A site-based security plan has been established in our patrol strategy that
is congruent with Chicago Alternative Policing Strategy (CAPS). The CAPS Program
is the overall police services delivery system for all of the City of Chicago. It is
community policing, problem solving policing, and utilizing traditional and
nontraditional approaches. The CHAPD's strategy is congruent with the community
policing, problem solving strategy of CAPS. We shall document the customized
diversity of each strategy operationalized at each site.

Our form of community problem solving policing allows for the individual officer to
work in collaboration with residents, CHA Management and Operations, CPD, other
law enforcement agencies, social service agencies, governmental institutions, to identify
problems, customize solutions to these problems, to create safe, secure communities.
The basic plan is built on the deployment of officers to four sites that include Cabrini
Green (North District) - IDA B. Wells (Central District East), Altgeld Gardens (South
District) and ABLA Homes (West District).

The recommendations of the Buracker Report, the City of Chicago CAPS police
delivery system, HUD's blueprint and MOA and HUD's long term plan are the
cornerstones of the strategy development. Community involvement is the central focus
of our plan.
Mr. Richard Urbanowski

                                             Page 131                               99-CH-201-1801
Appendix A


Page 3
June 26, 1998

OBSERVATIONS: However, physical security is only one aspect of an overall site-
based security plan.

RESPONSE: We agree with this statement. This is the reason that we are designing
our total strategy in our security plan based upon crime prevention through
environmental design (CPTED) defensible space and target hardening.           CPTED
encompasses physical security, management policies and procedures, community
problem solving policing, resident involvement. The physical security plans that have
been acknowledged for Cabrini Green and ABLA Homes also include Robert Taylor
Homes and all other developments based upon site modifications.

OBSERVATION: The Authority developed house rules by December 31, 1996, and
was enforcing them.

RESPONSE: We agree.

OBSERVATION: Mini-Station at Cabrini-Green staffed with 11 officers.

RESPONSE: The review indicated that the performance measure did not evaluate the
impact that the opening of the mini-station had on security at Cabrini-Green. We
disagree with this observation. Not only was a mini-station opened at Cabrini-Green,
but it was expanded to a 24-hour station and the AMR Report submitted to the OIG
documented substantial crime reduction in Cabrini-Green for year the 1997. Crime
reduction is an established performance and output measure.

OBSERVATION: CHAPD had not develop performance measures for six initiatives.
(These initiatives are not within CHAPD).

RIESPONSE: We shall meet with the responsible department, discuss and come up
with a solution.

OBSERVATON: The issue of COP, and crime analysis site-based plan.

RESPONSE: The CHAPD philosophy of policing is to include the stakeholders and
police in total problem solving, in recognition of each development requiring a
customized policing strategy based upon its uniqueness. There is no global approach
to the agency's policing initiative.

The Authority has exceeded the MOA requirement of reducing budget by $25 million
based upon $12.5 million per year for 1997 and 1998. In 1997, the Authority reduced
Mr. Richard Urbanowski
Page 4

99-CH-201-1801                         Page 132
                                                                            Appendix A


June 26, 1998

it's budget by $14.5 million as opposed to the required $12.5 million budget, while at
the same time experiencing an 8% reduction in crime in comparison to 1996. We are
experiencing a 20% reduction in crime comparin the first quarter of 1998 with the
first quarter of 1997.

RESPONSE TO RECOMMENDATIONS:

1A.    We shall develop and implement procedures and controls to establish and
       evaluate performance measures for all security initiatives undertaken. (Crime
       data analysis collections, time surveys and resident satisfaction surveys). Refer
       to the above for police performance and evaluation measures.

1B. We shall develop site based security plans. This will include resource allocation
    of personnel and equipment, physical improvements required to enhance
    security measures, community involvement in problem identification and
    problem solving, and human resource and quality of life initiatives.




Sincerely,




LeRoy O'Shield
Chief of Police

LRO/cg




                           INTEROFFICE MEMORANDUM

                                        Page 133                           99-CH-201-1801
Appendix A




TO:              RICH URBANOWSKI
FROM:            CARMEN E. BROWNE
SUBJECT:         RESPONSE TO ACCOUNTING SYSTEM AND CONTROLS
DATE:            07/20/98
CC:              MR. JOSEPH SHULDINER


      Rich I wanted to bring to your attention what actually caused the delay of the 1998
Budget submission.

        1. HUD did not approve the 1997 Budget until Dec. 29, 1997.

        2. The deprogrammed unit status and the corresponding AEL was in the discussion
           phase during the last quarter of 1997. This had to exist before we could
           submitting a revised 1997 Budget.

        3. Once we established what a deprogrammed unit would be and how to treat it in
           the Budget, we had to identify 3,661 units to deprogram. This was a difficult task
           because it had to tie to our viability plan. Many of the developments impacted by
           the viability study had strategic plans that were in their infancy stage. CHA was
           not going to deprogram units, which potentially needed to remain as relocation
           units and without going through the planning cycle this could not adequately be
           determined. We worked with Steve Sprague to develop the deprogrammed
           units. If you have any questions, please feel free to contact him.

        4. CHA had to determine which units to deprogram in 1997 before the 1998 process
           could begin.

       Having participated in all of these long planning sessions that it was a time
consuming process but we did come away with a good viability plan which is consistent
with the 1997 and 1998 budget documents. It should come as no surprise to anyone
reviewing the budget documents which buildings are targeted for demolition and when.

   I do believe that your recommendations are meritorious and Mr. Joseph Shuldiner
has agreed that there needs to be a policy to insure that the budgets are submitted in a
time fashion. Now this assumes that there are no significant issues between the CHA
and HUD.

        12A-The CHA will develop a policy and accompanying procedures to insure that the
        Annual Budget submission is completed and submitted to HUD in a timely fashion
        (i.e., by October 1st of each fiscal year).
        12B-The CHA will develop a policy and accompanying procedures to insure that the
        individual cost centers prepare and submit to the budgeting department their budgets
        in a timely fashion. Mr. Shuldiner has agreed that the budgeting department be given

99-CH-201-1801                             Page 134
                                                                       Appendix A


the authority to prepare budgets for cost centers who fail to comply with target
budget dates and targets.

   I know that Nori Kordvani and Gail Williams are in the process of drafting the
policy and procedures. I will insure that a copy be forwarded to become part of the
response documentation.




                       Chicago Housing Authority
              Office of Management Analysis and Planning
                    Interdepartmental Memorandum

                                  Page 135                           99-CH-201-1801
Appendix A




TO:              Richard Urbanowski, Senior Auditor

FROM:            Maggie Stewart

DATE:            July 27, 1998

SUBJECT:         Comments and Changes to the HUD IG Findings re: Redevelopment of
                 Housing and Rent Collections


I reviewed the attached correspondence received from the HUD IG Auditors. My comments are
directed to the section relevant to viability, the physical needs assessment, and marketing.

Viability. Minor modifications were made to the text. In general, the changes emphasize that,
based on the definitions stated in section 202, 17 sites were subject to Section 202, Of the sites.
seven were subject to the cost test comparison. The report does not clearly state that, because of
the revitalization (or treatment) of the property, only seven were subject to the cost test... the
others were exempt based on the rule.

Physical Needs Assessment. I concur with the author's summary.

Marketing. The report does not accurately reflect the status of conducting maket studies for our
properties. It is true that the Authority did not conduct an authority-wide market study for
various reasons: 1) market studies were already underway at HOPE VI or proposed HOPE VI
sites, 2) a market study was required and included in the scope of the planners hired by
development initaitives. NOTE: these planners assisted with the residnet plans for properties
includes and not included in viability. Combined, market studies are underway and NIAP concurs
with the need to ensure that staff is assigned to coordinate the results of any studies or planning
activitiies (Development Initiatives has undertaken this task as a result of preparing for the
Viability Submission). authrorize devleopment initaitive in the report

Further. the comments recommend that, .."since the viability only covered 17 developments, we
belief the marketing study and the development of a plan should have already been initiated.." is
NOT accurate: a) the sites included in viaiblity reprresent more than 1/2 our stock, b) plans were
generated as a result of the strategic planning process occuring at various sites, c) both viability
and a physical needs assessmetn are the first tools necessary to determine what the market
consists of, and d) site based waiting lists at all senior properties will require a marketing analysis
and strategy.


                                 Chicago Housing Authority
                        Office of Management Analysis and Planning
                              Interdepartmental Memorandum

99-CH-201-1801                                 Page 136
                                                                                      Appendix A




TO:             Richard Urbanowski Senior Auditor

FROM:           Maggie Stewart

DATE:           July 27, 1998

SUBJECT:        Comments and Changes to the HUD IG Findings re: Preventive Maintenance


I reviewed the attached correspondence received from the HUD IG Auditors. My comments are
directed to the section relevant to viability and the completion of the physical needs assessment
(PNA). The summary of these two sections is correct.

Other issues addressed in the report include the development of a funding plan and a statement
that the needs assessment was not used to develop a preventive maintenance program. George
Phillips has assigned Nelson Boulanger to assist with compiling comments from Housing
Management on this topic. However, it should be stated that the PNA was not commenced for
the purpose of developing a preventive maintenance program. Rather, it is completed to assist
CHA to develop and prioritize its modernization dollars. One can argue that the costs resulting
from the PNA are staggering and a radical treatment of all buildings, whether it is demolition or
comprehensive modernization, is the highest priority.

I agree that the data can be incorporated into the Authority's preventive maintenance plan.
Further, I recommend that staff reviews current practices and implements changes to
ensure that CHA is in compliance with HUD regulations requiring a plan to be
operationalized.




                     The Chicago Housing Authority
July 30, 1998



                                             Page 137                               99-CH-201-1801
Appendix A

Mr. Richard Urbanowski
Senior Auditor
Department of Housing and Urban Development
Office of Inspector General
77 W. Jackson Blvd., Suite 2646
Chicago, Illinois 60604-3507

Dear Mr. Urbanowski

This letter is in response to the Rent Collections Audit recommendation memo dated July 17,
1998.

Recommendation
10A- Immediately take steps and develop controls to ensure all uncollectible accounts are
referred each month to a collection agency.

10B-Establish procedures to obtain the status of cases referred to its collection agency and to evaluate the
performance of the agency. Replace the agency if it does not meet acceptable performance standards.

Response
We concur with the observations and recommendations included in the OIG report. Although the Tenant
Accounting department was understaffed for a period during 1997, an effort should have been made to reprioritize
responsibilities such that the collection efforts could continue. Also, there is an obvious need to improve
communications between the Authority and its collection agency. Therefore, the Tenant Accounting department
will take the following actions:

1.   Arrange a meeting with the collection agency to determine the specific information that the
     agency requires to perform its collection actions.

2.   Inform the CHA Property Managers of the specific information that they will need to provide to Tenant
     Accounting on a monthly basis.

3.   Provide a list of new tenants to be referred for collection to the agency on a monthly basis.

4.   Follow up with the agency on a monthly basis to receive the status of all tenants who have
     previously been referred to the agency.

In the future when staffing shortages such as this occur, the manager, assistant controller and controller will agree
on how to reprioritize responsibilities such that key tasks can continue to be performed.

Sincerely,


Carmen Browne
(Acting) Deputy Executive Director
Finance & Administration

                  626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8956
                            The Chicago Housing Authority
September 15, 1998


99-CH-201-1801                                         Page 138
                                                                                    Appendix A



Mr. Richard Urbanowski
Senior Auditor
Department of Housing and Urban Development
Office of Inspector General
77 W. Jackson Blvd., Suite 2646
Chicago, Illinois 60604-3507

Dear Mr. Urbanowski:

This letter is in response to the Procurement Department audit.

The Purchasing and Contracts Department wishes to thank the HUD I.G. Inspection Team for
their assistance in the assessment of our purchasing and contracts operations, which was executed
as a comprehensive overview of our purchasing operations consisting of, examination of our
internal records, interviews with purchasing personnel and review of associated documentation.
This inspection was conducted in a totally professional manner and in my opinion resulted in an
accurate snapshot of the Purchasing and Contracts and associated operations. This memorandum
provides the following information in response to the referenced HUD I.G. inspection:

•   Response to the observations noted
•   Discussion of the on-going actions to correct the deficiencies
•   Presentation of planned actions to improve operations and comply with the referenced
    assessments

The HUD inspection report outlined the seven observations noted during the previous I.G.
inspection, and the four remaining items that need to be corrected to complete the institution of
these recommended actions. These observations are identified below, immediately followed by
our response, identifying either the on-going or planned corrective actions that will be
incorporated as part of the overall improvement of the Purchasing and Contracts operation.

Observation:
The Authority no longer uses open purchase orders or open hardware accounts to purchase
materials for emergency repairs, and the manual has not been changed to reflect the new
procedures. The Authority uses the development’s petty cash funds to make emergency
purchases.

Response:
The maintenance manual does not currently reflect the new upcoming procedures, especially in
the area of emergency purchases. The Authority is currently in the contract award stages for
implementation of credit card accounts. The credit card which will be issued to the Authorities
various departments will become the standard method of executing emergency purchases. This
new method of executing purchases will also be outlined in the Credit Card Standard Operating
Procedures (SOP). The Credit Card will identify that these new emergency purchase procedures
take precedence over all previously established emergency purchasing policies, and the

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Maintenance Manual will be changed to refer readers to the Credit Card SOP for identification of
the emergency purchasing procedures.

Observation:
The Authority should require vendors to show discounts offered, not only as part of the contract
terms and conditions, but discounts should also be reflected on each invoice presented.

Response:
The Purchasing and Contracts Department will incorporate into all contracts and purchase orders
instructions to the vendors to show all discounts provided as a part of the invoice presented. A
sample copy of a proper invoice will be provided to all vendors showing them the correct way to
reflect the discounts offered on their invoices.

Observation:
The Authority still needs to assess its procurement process to ensure the Planned Memorandum of
Agreement strategies were corrected.

Response:
The Authorities planned actions, are to finalize the corrective actions identified in the HUD
Memorandum of Agreement (MOA) procurement strategies, than officially request that the
Procurement Department of the HUD Regional Office execute a comprehensive review of our
operations, our implementation of the MOA strategies and the effectiveness of that
implementation.

Observation:
The Authority did not contain procedures to perform a periodic analysis of its contracting
process.

Response:       The Purchasing and Contracts Department has developed a detailed inspection
checklist based on the shall and must directives contained in the HUD Procurement Handbook
7460.8 Rev-1, that will provide a periodic and proactive review and assessment of all the
Authorities Purchasing and Contract Operations. Additionally, this inspection checklist has an
area where corrective actions are addressed for those areas identified as deficient. These
corrective actions identify the action taken to resolve the deficiency, and also requires the joint
signatures of the inspector and the Department Director to ensure that these actions were
implemented. This inspection will be conducted on a quarterly basis and is being incorporated as
part of the rewrite of the authorities procurement policies and procedures. An inspection process
was instituted, starting in November 1997, with the first physical inspection conducted in
December 1997. This quarterly inspection was again repeated in April 1998. The new inspection
process is a great deal more in depth and will produce a significantly better method of analyzing
and correcting our internal processes. It is fully anticipated that this rewrite will be completed by
December 31, 1998.

Observation:
The Authority executed contracts after the effective dates.

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                                                                                        Appendix A



Response:
The Purchasing and Contracts Department has already removed the preprinted dates on all
contracts. The effective date of the contract is now reflected as the date that the Contracting
Officer signs the contract or contract modification. All change orders or modifications to
contracts are now executed in full accordance with the procurement laws and regulations
identified in the 24 C.F.R. 85.36 and the HUD Procurement Handbook. All contracts and
purchase orders in excess of $5,000.00 are now reviewed and approved by the Director of
Procurement prior to being signed or forwarded to the appropriate signatory authority. This
review process ensures that all contracts are fully and competitively bid, and that the contracts
requirements are not started until an authorized Contracting Officer executes the formal award
process through contract signature.

One significant part of the HUD I.G. inspection, was the identification of the assessment
conducted by Beau Geste Enterprises Inc., in March 1998. The HUD inspection recommended
that the authority analyze the recommendations provided in the Beau Geste assessment and take
appropriate actions. In this context I have identified a summary of the suggested changes and
improvements identified in this report and further identified the on-going actions to implement
those recommended changes that are appropriate for the improvement of the overall Purchasing
and Contracts operations.

1&2. Recommendation:
Consolidate all purchasing, contracting, contract administration, warehousing and surplus
property management activities under one procurement department.
2.     Dispose of obsolete property.

Current Actions:
We have already started to consolidate all of these procurement operations under one department.
The first of these consolidations is the responsibility for surplus property being centralized under
the Purchasing and Contracts Department. During the past six months, over $900,000.00 in
surplus property has been competitively bid and sold, developing not only a significant reduction
in excess and obsolete property, but developing a revenue source from property that previously
cost the authority a significant financial outlay to store and maintain. Additionally, the Purchasing
and Contracts department has developed a consolidated listing of all property that has not been
issued in excess of two years, and has begun a proactive bidding process for this surplus property,
in a concerted effort to reduce this surplus and save inventory and warehousing costs.

By the end of December 1998, warehouse operations will not only be reduced in scope, but the
Purchasing and Contracts Department is rapidly moving towards a just-in-time, rather than a just-
in-case mentality and accurately predicting the supply requirements based on historical usage and
acquisition planning for funded projects. Also by December 1998, warehouse operations will be
consolidated under the Purchasing and Contracts Department as we finalize the reformation of the
way we execute warehouse operations. As part of this reformation, the authority is going to
assess the possibility of contracting out warehouse and inventory operations and centralize the
contract administration of this contract under Purchasing and Contracts Department Management.

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The RFP for contracting out of all Fleet operations has recently closed, and will also be
consolidated under the purchasing and Contracts Department, for contract administration
functions and oversight shortly after the contract is awarded.

Recommendation:
Conduct a customer satisfaction survey of with its vendors and customers.

Current Actions:
The Purchasing and Contracts Department is currently in the final stages of executing a customer
and vendor survey, to identify how our customers and vendors visualize that we can improve
procurement operations. This survey is based on two important principles. First, the most
effective contract operations are based on a win-win-focused principle between the authority and
their vendors. If vendors win, than the authority wins, because the contracts are executed more
effectively and cost efficiently. One of the most important parts of the win-win concept, is that
vendors receive their payments in a timely manner. Vendors are encouraged at the onset of the
contract the Purchasing and Contracts Department immediately if payments are being delayed for
any reason. This single action has gone a long way to improving contractor authority relations
significantly. Secondly, this customer survey will provide important feedback to our department
regarding how effectively we are support the various departments within the CHA and gives us a
vehicle to ensure that this support is executed in a timely manner. Any problem areas discovered
or process inefficiencies identified, will be addressed through the biweekly training conducted in
the department. The use of these customer and vendors surveys as a basis will significantly
improve our responsiveness to our customers requirements and improve vendors relations.

It is fully anticipated that these vendor customer surveys will be completed and assessed and
improvements incorporated by the end of the calendar year.

Recommendation:
Organize information in the CCS Computer System to develop meaningful measures of what must
be managed.

Current Actions:
In coordination with the MIS Department, Purchasing and Contracts Department has already
started a comprehensive development of electronic management reporting tools that will
accurately reflect the effectiveness of management systems. The first of these reporting tools is
the identification and consolidation of the items located in the warehouse, that have not had one
issue from the existing stock in more than two years. The second reporting tool is a documented
report of the active contracts and purchase orders, tracking the time expended on each action and
the obligated dollars.

We are actively evaluating procurement unique software that will allow us to take the data from
the CCS system and compile it into viable management data tools that we utilize to accurately
report and evaluate the effectiveness and efficiency with which we accomplish the reporting
mission. Additionally, we intend to utilize this procurement software to analyze how effectively

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                                                                                        Appendix A


we utilize and track the procurement card purchases, especially in the area of cost effectiveness of
overall transactions in regard to potential savings that we generate by using requirements type
contracts for certain commodities, rather than utilizing the purchasing card. The two systems
that we have currently evaluated are the SACCONS System and the Standard Procurement
System (SPS), both of which are currently being utilized by a majority of Federal Agencies to
execute their procurements.

These are just the first of the reporting tools that are being instituted and evaluated to improve
our procurement actions, and to ensure all of our operations are conducted in the most timely and
efficient manner possible. Continuous improvement is the focus of all of our procurement
operations.

Recommendation:
Require and support professional certification of the procurement and warehouse staff.

Current Actions: Although, professional certification is not mandatory, the Purchasing and
Contracts Department has taken significant steps toward certification of our personnel through
the National Institute of Government Procurement (NIGP). We have currently contracted with a
instructor from NIGP, to provide a comprehensive overview of the topics covered on the
certification exam, this overview will be conducted on October 1, 1998 at the Authority.
Additionally, we have established a test date with NIGP for October 16, 1998, where the
examination will be given to all qualified Purchasing and Contracts members. The City of
Chicago has expressed interest in joining us for the review and testing and has indicated that they
will send five of their personnel for certification.

Recommendations:
Educate Authority personnel about procurement requirements.

Current Actions:
The Purchasing and Contracts Department has already started a outstanding procurement training
program. We have already contracted for two courses with George Washington University Law
School, the premier procurement instruction in the nation. These two courses are Advanced Best
Value Procurements and Subcontract Law. We have already completed the first of these two
courses, and the resulting impact showed immediate improvement in the execution of best value
procurements. The second of these two courses is being conducted on September 24 & 25, 1998.
Additionally, the Purchasing and Contracts Department has applied for funding to execute a series
of basic procurement courses for managers in the Authority. We are also engaging a training
institute to provide training for the use of the upcoming credit card. This training will consist of
how to for cardholders and departmental directors, as well as how to most effectively use to card
to obtain fair and reasonable prices. All of this training will create a basic understanding of
procurement procedures and laws by the managers and directors within the Authority. This
training will significantly reduce contractual mistakes that increase the costs of contract execution
and that also damage the Authorities win-win relationship with their vendors.




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The members of The Purchasing and Contracts Department are dedicated to improving customer
service and ensuring that all procurement operations are conducted in strict accordance with
applicable laws, regulations and policies. Inspections such as this one conducted by the HUD I.G.
as an in progress review, are important and welcome methods of contributing to improving our
overall operations.

Sincerely,



Carmen Browne
(Acting) Deputy Executive Director
Finance & Administration




                     The Chicago Housing Authority
September 23, 1998

Richard Urbanowski
Senior Auditor
Department of Housing and Urban Development
77 West Jackson, Room 2646
Chicago, Illinois 60604

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                                                                                    Appendix A




SUBJECT:      Response to HUD IG Draft Audit

Dear Mr. Urbanowski:


This correspondence is written to advise you that the Modernization Division has reviewed the
"Modernization/Redevelopment of Housing" portion HUD's IG draft observation audit.

The Modernization Division concurs with HUD's recommendation that the CHA conduct a
marketing study and develop a comprehensive plan for each of our developments.

In light of this, the Modernization Division will assume responsibility for developing the RPF as
well as administering the contracts with the firms that will conduct the marketing studies and
subsequent plans. We will submit to you a time schedule to complete this study in the immediate
future.

If you have any question or require additional information, please contact me at 312-791-8500,
extension 4608.


Sincerely,



Margaret D. Garner, Director
Modernization Division

MDG/cce

cc:   Greg Russ


        626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8500

               The Chicago Housing Authority
September 24, 1998

Ms. Anne-Marie Chavez
Senior Auditor
Department of Housing and Urban Development
Office of Inspector General
77 West Jackson Boulevard - Suite 2646

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Appendix A


Chicago, IL 60643-3507

SUBJECT: Response to HUD IG Audit: Funding for Maintenance and Modernization Activities

Dear Ms Chavez:

This letter is to respond to draft observation recommendations contained in the HUD IG Audit
regarding Funding for Maintenance and Modernization Activities.

Recommendation 6A
I am not convinced that HUD's recommendation that the CHA develop and prepare an additional
written financial plan is necessary, given the fact that the CHA has several large documents that
discuss financial planning. These documents include:

1.   The Long Term Plan 1996-2000
2.   The Comprehensive Budget for Fiscal Year 1997
3.   Strategic Planning Development Profiles based on the Physical Needs Assessments (9/4/97)
4.   The 1998 Comprehensive Grant Program (CGP) Annual Submission (May 98)
5.   The CHA OCRA 202 Viability Assessment (May 98)

Each of these documents addresses the goals, objectives and specific planned tasks of the
Authority. In additions these documents address the financial means for accomplishing these
goals at varying levels of detail. For the Authority as a whole, the Comprehensive Budget
explains the anticipated income sources and planned expenditures.              For details about
Modernization funding, the CGP Annual Submission contains a strategy statement that lays out
the overall plan. Details of the modernization financial plan are contained in the more than 100-
page Physical Needs Assessments, and corresponding Annual Statement and Five-Year Plan.




            626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8500


HUD's recommendation to develop "a financial plan to ensure maintenance and modernization
funds are effectively spent" appears superfluous to the existing federal requirements of the CGP
Program. What exactly is missing from the documents listed above that should be contained in
the proposed financial plan?

The observation on page 2 that the Authority did not document the actions taken to reduce the
amount of money spent on security is not accurate. Pages 1-2 of the CGP 1998 Annual Strategy
Statement reads:

"While public safety and security will continue to be a priority, changing times call for a re-
examination of our approach to this crucial issue. Over the past several years, increased use of

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                                                                                      Appendix A


CGP funding for public safety and other management improvements, resulting in decreased
availability of funding for physical improvements to the CHA's dwelling structures and grounds,
has led to severe neglect and deterioration of our communities. In many cases, dwelling
structures, even those located in otherwise viable communities, have now deteriorated well
beyond the point of economical repair. We must now meet the challenge of beginning to
appropriately use CGP funds to focus on key areas, which have a significant impact on the quality
of life for our residents. Therefore, the 1998 submission aggressively increases funding for
dwelling structures and resident initiatives, and moves the CHA's CGP budget toward
compliance with the regulatory guidelines for expenditures of these funds."

Recommendation 6B
The Modernization Division concurs with the second recommendation about incorporating the
viability assessment into capital improvement programs. In fact, this has already been done. The
1998 Comprehensive Grant Program Annual Submission included the complete draft viability
assessment (the final was not available at the time the CGP was submitted to HUD) as an
appendix to demonstrate that the viability results are incorporated into the CGP five year plan.

Additional Observation
On Page 3 of the Draft Observations, under the subject "Old Modernization Program Funds were
Expended", HUD states that as of June 5, 1998, the CIAP Program 915 had $451,486 in
remaining funds still available. This program has since been closed out, with all of the remaining
funds drawn down from LOCCS on August 21, 1998 (See attached). It is unknown what the
explanation about Gautreaux- and Habitat-based delays is based on.

I look forward to reviewing the final status report on the CHA's Assessment of Progress. I trust
that the additional information contained in this letter provided some clarity to these important
issues.

If you have any questions or require additional information, please contact me at 791 8500,
extension 4608.

             626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8500
Sincerely,


Margaret D. Garner
Director of Modernization




                                             Page 147                               99-CH-201-1801
Appendix A




                   The Chicago Housing Authority
October 1, 1998

Ms. Anne-Marie Vanderberg
Senior Auditor
Department of Housing and Urban Development
Office of Inspector General
77 W. Jackson Blvd., Suite 2646
Chicago, IL 60604-3507

Dear Ms. Vanderberg:


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                                                                                        Appendix A


Attached is the Chicago Housing Authority's (CHA) response to your audit report dated
September 23, 1998. We have reviewed your draft findings and would like to offer the following
comments.

It is our understanding that these comments will be included in the final report verbatim. The
comments will address each recommendation and/or finding in the order they were listed in the
original audit report. We are pleased to learn that the draft observations and their content will not
be released prematurely and are for review and comment only.

Our review of the audit indicates that the auditor did not secure a significant number of supportive
documents. As a result some of the findings do not truly reflect the Authority's performance
relative to its Economic Development initiatives. The information attached is provided in an
effort to assist your office in reaching a more informed conclusion in advance of publication or
disclosure of the information contained in the audit report.

If you have any questions and/or concerns please call me at (312) 791-8500.

Ronald Carter, Jr.
Director of Economic Development




            626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8500




                                              Page 149                                99-CH-201-1801
Appendix A


                            Economic Development Opportunities
                                      For Residents

HUD Review:

To ensure these efforts continued, we recommended that HUD assured that the Authority:

(1)    emphasized the development of joint venture agreements between the resident owned
       companies and private sector businesses;
(2)    monitored the construction and services contractors to ensure Section 3 requirements
       were complied with;
(3)    identified government, non-profit, and private sector agencies to form partnerships for
       resident training and employment programs;
(4)    completed surveys to assess resident satisfaction by January 31, 1998;
(5)    took appropriate action based upon the results of the resident surveys;
(6)    worked to expeditiously complete its pending contracts and continued to explore
       additional contracts with the resident owned companies in order to reach the yearly goal
       of 25 contracts.

HUD Finding:

As of September 11, 1998, the Chicago Housing Authority implemented four of the six
recommendations.

The Authority did not meet its yearly goal to execute 25 contracts with resident owned businesses
in 1996. We could not determine if the Authority met its 1997 goal or will meet its 1998 goal to
execute $10 million worth of contracts with resident owned businesses for each year.

HUD Finding:
Yearly Contract Goals               The Chicago Housing Authority did not meet its 1996 goal
Were not Met                        to execute 25 contracts with resident owned businesses.
                                    Additionally, the Authority was unable to provide us
                                    documentation to show it met its goal for 1997 or was on
                                    track to meet its goal for 1998.

Response:
The Purchasing & Contracts Department's C.C.S. system is the computerized database that tracks
all contracts/purchase orders (P.O.s) for the Authority. All original, fully executed contracts are
stored in the files of this department. In 1996, the CHA contracted $8,639,184.90 dollars with 16
Resident Owned Businesses (ROBs), RMCs or resident organizations. These contracts included
Custodial contracts, Laundry Licensing Agreements, Printing, and Service


            626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8500



99-CH-201-1801                               Page 150
                                                                                     Appendix A


and Management contracts. The following is a list of twenty-five resident companies that
participated. Other P.O.s and subcontracts issued during this same period are not listed below.

In October 1996, RFP No. 96-190-CG for vacancy reduction work at various CHA
developments/ properties (not to exceed $3 million) was closed and evaluated. Sixteen (1 6)
ROB construction companies were awarded Phase I contracts of $25,000 each. This precedent-
setting contract faced several administrative obstacles that delayed the completion of fully
executed contracts. Actual P.O.s were issued to these companies over a six-month period. Phase
11 will begin soon.

      Custodial Contracts:
      Robert Taylor A and M. Ali Community and Economic Development Corporation Joint
      Venture
      Robert Taylor B and M. Ali Community and Economic Development Corporation Joint
      Venture
      Hilliard Homes Custodial Corporation
      Harold Ickes Custodial Corporation
      Washington Park/Frederick Douglas Custodial Corporation
      Things To Do Connections Joint Venture
      Senior Sweeping Joint Venture
      Clean Sweep Custodial Corporation
      William Green Homes Custodial Corporation

      Laundromat Licensing Agreements:
      Ogden Courts Laundry
      William Green Homes Laundry

      Resident Management Corporations:
      LeClair Courts RMC
      Dearborn Homes RMC
      1230 Burling RMC

      Inventory Contract
      McCright & Associates subcontracted to Senior Central Inc.

      Resident Construction Contracts:
      APP Contractors
      Exodus
      People for Community Recovery
      Crown Construction
      All Seasons, Inc.
      Vital Construction


               626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8500


                                            Page 151                               99-CH-201-1801
Appendix A


      Ivy's Painting
      JK Developers
      A & D Contractors
      Muhammad Ali Community and Economic Development Corporation

      Printing Contracts:
      Cabrini Textiles (contracts w/ Inner City Games and Safe Summer)
      Made In Cabrini Inc. (contracts w/ Inner City Games and Safe Summer)

HUD Finding:

                 Although the Authority withheld amounts from the contractors' final payments, the
                 Manager of the Contract Compliance Division incorrectly calculated the amounts
                 for four of the five contracts.

Response:
The auditor requested information regarding five contractors (under $100,000.00) where the
contractor complies with Section 3 by contributing to the Education Fund. These five contractors
received letters from the Manager of Contract Compliance, Joy Johnson, stating what the
contractor must do in order to comply with Section 3, and her estimation of the labor costs which
is 60% of the total of the contract. This percentage is purposely high to encourage the contractor
to correct the CHA's estimate based upon their own professional experience. With service
contracts, the total contract amount is used to determine the Section 3 amount.

The contractors don't always correct our estimation, therefore, two of the amounts that were
contributed to the Section 3 Educational fund were higher than if Contract Compliance had a
truer estimate of the contractor's labor dollars, which the contractor should have supplied. The
undercharged contributions were miscalculations on our part.

Since the audit, Section 3 procedures have been modified. When a contractor requests final pay
out and that contractor has not fully complied with Section 3, the gross amount earned by each
employee who worked on that project is added to determine the actual labor amount and the
Section 3 required amount is re-computed. In this way, contractors are not over- or under-
charged for compliance.

HUD Finding:

                        In 1997, the Economic Development Division changed its yearly goal from
                        executing 25 contracts with resident owned businesses to executing $10
                        million worth of contracts with resident owned businesses. The Authority
                        told us that it had contracted with 39 resident owned businesses and
                        resident management corporations ($13.2 million) in 1997. The

            626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8500



99-CH-201-1801                                Page 152
                                                                                      Appendix A


                      authority was only able to provide three contracts that totaled $363,080 to
                      support the contracting activity.

Response:
A report from Purchasing & Contracts CCS tracking system lists 37 ROB's contracting activity
for 1997 which exceeds $12 million dollars (see attached). The listing has been included for your
review.

The Authority does not record contracts that do not require payment in the CCS system. The
laundry initiative resulted in a contract between CHA and 21 ROBs that lease space from CHA to
provide laundry facilities. These ROBs entered into either a joint venture or subcontract with one
of two major laundry companies to provide this service. The board resolution awarding the
contracts is included for your review (resolution attached).

HUD Finding:
                      The Authority told us that it had met its goal for 1998 and was involved in
                      contracting activities worth approximately $13.2 with 17 resident owned
                      businesses and resident management corporations. We requested to review
                      the documentation that supported the contracting activity with the 17
                      businesses. The Authority did not provide any contracts or documentation
                      to support the contracting activities.

Response:
A report from Purchasing & Contracts CCS tracking system lists 35 ROB's contracting activity
for 1998 and exceeds $ 17 million dollars (see attached). The listing has been included for your
review.

HUD Finding.
                      According to the Authority's Diversity Outreach Specialist, contract
                      activities under $25,000 are supported by a purchase order. We reviewed
                      the Authority's minority vendor purchase order listings for 1996, 1997,
                      1998 to verify that purchase orders were used for contracting with resident
                      owned businesses. We determined that purchase orders were used for
                      contracting with resident owned businesses. However, the extent of the
                      activity could not be determined because the listings did not identify which
                      businesses were owned by residents or were resident management
                      corporations. Additionally we could not determine when contracts were
                      executed or the initial amounts of the contracts from the purchase orders.

Response:
At present, the C.C.S. does not identify which companies fall under the category of a ROB, RMC
or resident organization. It also does not identify subcontractors or dual management


            626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8500


                                             Page 153                               99-CH-201-1801
Appendix A


agreements. We are taking steps to add a new field in the system that would do so.

The Auditor was provided with a current list of 108 certified ROBs that is included for your
review. That list should have been cross-referenced with the minority vendor listing to determine
how many purchase orders issued were used for contracting with ROBs and RMCS.

HUD Finding.
                       The Economic Development Division did not have a system to track its
                       progress in contracting with resident owned businesses and resident
                       management corporations. As a result, HUD and the Authority lack
                       assurance that the Authority met its goals in the past or is on track to meet
                       its goal for 1998 to provide economic opportunities for its residents.

Response:
The Economic Development Division hired Mr. Marty Melinger from the CHA Inspector
General's office to conduct audits and tracking of ROB and RMC contracts. Prior to Mr.
Melinger's hiring in March of 1998, we relied upon the Diversity Outreach Specialist and our in-
house database to track all ROB, RMC and minority contracting Authority-wide via the C.C.S
system. Mr. Melinger was brought on board specifically to address contracts secured by ROBS,
RMCs and resident organizations in an effort to develop a system that will report tracking
activities monthly. The first draft document is scheduled to be published in November, and is
expected to become a standard attachment to the CHA's monthly activity report.

Conclusion:
All the attached information was made readily available to the auditor as requested. We feel this
documentation is sufficient to conclude that the Authority (a) nearly met its 1996 goal to execute
25 contracts with ROBS; (b) met its 1997 goal to execute $10 million worth of contracts with
ROBS; and (c) as of September 30th has met the 1998 goal by contracting $17 million with
ROBS.

The attached information is further indication of the existence of the substantiating documents
that clearly indicate all goals were met. In addition, the CCS system was the initial method for
tracking all resident contracting activity. The efforts of Mr. Melinger will enhance the reliability
and delivery of a monthly reporting system.




            626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8500
                       The Chicago Housing Authority
99-CH-201-1801                                 Page 154
                                                                                      Appendix A



October 2, 1998

Mr. Richard Urbanowski, Senior Auditor
Department of Housing & Urban Development
Office of Inspector General
77 W. Jackson Blvd. Suite 2646
Chicago, EL 60604-3507

Dear Mr. Urbanowski:

In response to your letter dated September 29, 1998 we submit the
following:

The Chicago Housing Authority concurs with the observations and recommendations described
relative to your review of our effort to secure Alternative Funding Sources.

Should you have any questions or require additional information you may contact Sharon Elliott
of my staff at 791-8500 x4697.

Sincerely,



Ed Moses
Deputy Executive Director

CC: Joseph Shuldiner
    Denise Eligan




             626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8500

             The Chicago Housing Authority
                                             Page 155                               99-CH-201-1801
Appendix A




October 5, 1998

Ms. Anne-Marie Chavez
Senior Auditor
Department of Housing and Urban Development
Office of Inspector General
77 West Jackson Boulevard - Suite 2646
Chicago, IL 60643-3507

SUBJECT: Response to HUD IG Audit General Draft Observation:
          Chapter 5, Vacancy Reduction/Unit Turnaround

Dear Ms. Chavez:

This letter responds to the draft observation recommendations contained in the HUD IG Audit
regarding Vacancy Reduction/Unit Turnaround, specifically referencing the activities in this area
that are currently the responsibility of the Modernization Division.

Recommendation 5A: Implements an effective system for tracking of unit turnaround
time.
Currently, the CHA uses the CCS system for tracking all information related to dwelling unit
status. Information related to the actual vacate and move-in dates is input at the development
level by Housing Management staff. The Modernization Division's Force Account Labor (FAL)
teams are brought into the process by request of the Housing Management staff when there are
households available to reoccupy the unit. This may or may not be immediately after the unit is
vacated. In some cases, units assigned to the Modernization FAL teams have been vacant for
several years.

The Modernization FAL staff is charged with maintaining a comprehensive list of all units
addressed, including the scope of work performed in each, and the start and end dates for the
rehabilitation activity. Input of all unit turnaround information into the CCS system is the
responsibility of the Housing Management staff, who have been trained in the CCS system and
have access to the data base for the purpose of updating and tracking unit status information.

Recommendation 5B: Develops procedures to verify that the rehabilitated units meet
HUD's Housing Quality Standards.
The Modernization Division believes that this system is already in place. The punch list

           626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8500
referenced on page 2 of the report actually encompasses all the requirements necessary to
assure that each unit is decent, safe, and sanitary according to HQS standards, and is
approved by management as part of the process of accepting the unit for reoccupancy.

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                                                                                         Appendix A


Included for reference is a typical certification form, which notes the date of acceptance
of a unit by management. Also included are pictures of typical units rehabilitated by the
Modernization FAL teams, which clearly show the department's standards of quality
workmanship.

Compliance with HQS standards has been, and will continue to be, the responsibility of
development management staff. Therefore, if any HQS deficiencies are found in the units during
the joint inspection after rehab, management will not accept the unit until and unless those
deficiencies are corrected. However, we believe that the suggestion of including a statement to
that effect on the unit turnover punch list is a useful one, and this will be implemented to clarify
the compliance of the rehabilitated units with HUD HQS standards.

Recommendation 5C: Develops coordination procedures between the
Force Account Labor Department, Development Managers, and the
Occupancy Department,
The Modernization Division believes that these procedures are substantially already in place. No
Force Account Labor teams are dispatched to any developments without a written request from
the development management staff. Over the past several years, as the CHA worked to address
the relocation needs related to consolidation, or households needing a lead-free dwelling for the
health of children with elevated blood lead levels, these requests always initiated with involvement
from the Housing Management staff. To improve the CHA's level of response to the needs of
EBL families, the Modernization Division has held trainings for development management staff,
so that these relocations will be given priority attention. The majority of units rehabilitated by the
Modernization FAL teams over the past year have been a direct response to immediate relocation
needs. In other cases, requests from development managers were based on the managers having
sufficient waiting qualified applicants on hand to lease the units upon completion. For reference,
we are including a copy of a typical request for service from one of our Regional Property
Managers, and another, which identifies need and scope of work, related to a unit rehabilitation
requested by the Environmental Unit.

We believe that the examples cited on pages 2 and 3 of the report did not accurately represent the
complete circumstances surrounding these assignments. In the case of the Rockwell Gardens
property at 2450 W. Monroe, the FAL teams were called in to finish work left incomplete by an
outside contractor. These units had previously been occupied by Rockwell residents who had
vacated these units specifically for the purpose of allowing comprehensive rehabilitation of the
property, and these households had been temporarily relocated to other buildings in that
development pending the completion of rehabilitation. According to CHA procedures, transfers
within a development are handled on site, by the development staff, not by the Occupancy


            626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8500
Department. The central Occupancy Department is charged with the responsibility of processing
new applicants and referring their information to the developments, and with coordinating
voluntary transfers of current residents between developments as needed. Therefore, it is
understandable that staff at the Occupancy Department would not, when asked, have a list of 73

                                              Page 157                                99-CH-201-1801
Appendix A


new applicant households waiting for housing at Rockwell in hand. These households are already
residing in the Rockwell development, so would not be on the "wait lists" at the central
Occupancy office. The Occupancy Department, however, does have access to the unit status
information, which would reflect a change in status to "occupied" when the development
management staff entered the move-in information into the CCS system. The same is true of the
units rehabilitated at 2822 S. Calumet, in the Prairie Courts community. This building has been
targeted by the Relocation Department as a relocation resource for families moving out of
buildings at the Robert Taylor Homes, and documentation is being processed by the Relocation
Department.

We do agree that timely occupancy of the units upon completion of rehabilitation is important so
that vandalism to those units can be avoided. Temporary delays in the move-in of relocating
families are often due to the need for Relocation staff to schedule the moving staff and vehicles,
and individual situations in the resident families. Other dynamics impacting upon this situation
include the need for community outreach and meetings to ensure that the relocations are
consistent with strategic planning initiatives that have already received staff and resident support,
and the site-specific safety challenges faced by families moving into buildings controlled by rival
gangs. Despite these challenges, we agree that continued coordination among all departments
benefits all concerned parties.

I trust that the additional information contained in this letter helped clarify these important issues,
and look forward to reviewing the final status report on the CHA's Assessment of Progress.

If you have any questions or require additional information, please contact me at 791-8500,
extension 4608.

Sincerely,


Margaret D. Garner
Director of Modernization

cc:    J. Shuldiner    E. Moses      G. Russ      T. Harkless




             626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8500

             The Chicago Housing Authority
October 5, 1998

Ms. Anne-Marie Chavez

99-CH-201-1801                                 Page 158
                                                                                      Appendix A


Senior Auditor
Department of Housing and Urban Development
Office of Inspector General

77 West Jackson Boulevard - Suite 2646
Chicago, IL 60643-3507

SUBJECT:        Response to HUD IG Audit General Draft Observation:
                Chapter 7, Annual Inspections

Dear Ms. Chavez:

This letter is to respond to the Draft Observations from the HUD IG Audit regarding Annual
Inspections, Chapter 7.

Job Order Contracting System
While HUD's recommendation to implement a Job Order Contracting System (JOCS) is sound, I
am unclear as to why this recommendation is included in the chapter on Annual Inspections.

When the JOCS system is implemented, it will be used in conjunction with the Purchasing
Department primarily to complete modernization and capital improvement projects. JOCS will
not be used for the completion of Annual Inspections. While Annual Inspection Reports will be
one piece of information analyzed to determine which JOCS work will be required, Annual
Inspections will not generate all JOCS work. Therefore, I suggest placing this recommendation in
a different chapter relating to modernization, capital improvements and/or construction work.

If you have any questions or require additional information about this comment, please contact me
at 791-8500, extension 4608.



Margaret D. Garner
Director of Modernization

cc:   J. Shuldiner   E. Moses   G. Russ     K. Nix


             626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8500
                              CHICAGO HOUSING AUTHORITY
                                 Housing Management Division
                                   Inter-Office Memorandum


TO:             ANNE-MARIE VANDERBERG SENIOR AUDITOR



                                             Page 159                               99-CH-201-1801
Appendix A

FROM             GEORGE A. PHILLIPS
                 ASSISTANT DIRECTOR, OPERATIONAL SERVICES

DATE:            October 5, 1998

RE:              ANNUAL INSPECTIONS - RE-INSPECTIONS


I have reviewed the recent observations from the HUD Office of the Inspector General, as it
relates to our completion of Annual Inspections.

One of the areas that were sited as a deficiency was the lack of quality control re-inspections.
Specifically, the report stated, “The Authority did not develop or implement policies and
procedures to conduct quality control reviews of Housing Quality Standards inspections to
insure inspection accuracy".

While the technical wording of the I.G. report is accurate, there are no formal policies and
procedures in place for the re-inspection of Annual inspections, this suggests no re-inspections
were completed for that reporting period, and that is a false assumption.

Quality Control re-inspections were completed by a team of four administrative staff, Denise
Richardson, Administrator, Housing Management; Deena Lofton, RMC Liaison, Housing
Management; Nolea Jones, Administrative Assistant, Housing Management, and George A.
Phillips, Assistant Director, Operational Services. Re-inspections were conducted in the
following developments: Cabrini-Green Homes; Stateway Gardens; Judge Green Senior Units;
Trumbull-Lowden Homes, and ABLA Homes. A ten percent sample was taken of the various
unit counts to give a statistical sampling of the developments. As problems were identified,
corrective steps were identified, and relayed to the development staff.

In order to formalize this procedure for the future, and to comply with the suggestions of the
HUD O.I.G, we must develop written re-inspection policies, and implement them as soon as
possible.

My suggestion is to have the Customer Support Audit Teams complete this as a part of their audit
functions. They currently go to each of the management offices to monitor compliance with work
order procedures. This is a logical addition to their current role. The job description of this
position will have to be modified to include this new duty, however, this will not significantly alter
the type of work they now perform. It is my recommendation that conversation be initiated with
the union responsible for this group now, to add this function on to the job description of the
Customer Support Audit Team. Human Resources will then have to reevaluate this new position,
and make sure the job description is an accurate depiction of the services required.

Additionally, the MAP department should work with the Customer Support Center, and Housing
Management, to develop written procedures to identify when these re-inspections should occur,
how many should be performed, and follow up on decencies identified.


99-CH-201-1801                                 Page 160
                                                                                     Appendix A


This action would bring us one step closer to total compliance as identified by the HUD O.I.G.

If more information is needed, please advise.


George A. Phillips
Assistant Director
Operational Services

Cc: G. Russ
    T. Harkless
    U. Richardson
    V. Schneider
    C. Reed
     File




                       The Chicago Housing Authority

October 7, 1998


Mr. Richard Urbanowski
Senior Auditor
Department of Housing and Urban Development

                                                Page 161                           99-CH-201-1801
Appendix A


Office of Inspector General
77 W. Jackson Blvd., Suite 2646
Chicago, Illinois 60604-3507

Dear Mr. Urbanowski:

This letter is in response to the Assets Management Audit.

This memorandum provides information in response to the referenced HUD I.G.
section "The deferred compensation contract was not adequately monitored".

The Authority disagrees partially with this finding. The deposits are verified. The Payroll
Department sends PEBSCO, the plan administrator a copy of the check request and the list of
plan participants and their amounts for each deposit. Payroll usually gets confirmation every two
weeks. If there is any discrepancies they are resolved at that time.

The Authority also receives on a quarterly basis, a Statement of Account and an Investment
Activity Report. These reports show in total deposits, transfers, withdrawal and earnings. The
Statement of Account lists the various funds the participants invested in and their earnings.

Withdrawals are not monitored at this time. PEBSCO is contracted to administer this program
and the funds are the employees not CHA. Each participant receives quarterly statements and as
of today we have not received any complaints.

Since the Authority does not have formal policies and procedures for monitoring
the deferred compensation plan, we will prepare them by year-end.

Sincerely,


Carmen Browne
(Acting) Deputy Executive Director
Finance & Administration

             626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8500
                       The Chicago Housing Authority
                             Risk Management Department

October 14, 1998

Mr. Richard Urbanowski
Senior Auditor
Department of Housing and Urban Development
Office of Inspector General

99-CH-201-1801                                Page 162
                                                                                     Appendix A


77 W. Jackson Boulevard, Suite 2646
Chicago, IL 60604-3507

Re:      CHA Risk Management Draft Observations

Dear Mr. Urbanowski:

Thank you for forwarding your draft observations of the CHA Risk Management Department.
This correspondence will offer our comments on these observations and the corrective actions
that will be taken to address the recommendations contained in your report.

We are in fundamental agreement with your audit findings for the Risk Management Department.
Our comments will reflect our opinion on the level of activity that has occurred in areas that are
generating HUD's recommendations.

Cost Analysis of Workers' Compensation Program

The CHA currently utilizes a Third Party Administrator (TPA) for our Workers' Compensation
claim management. This TPA has been very effective in reducing our overall claim count and the
timeliness of claim payments. The CHA's public accountants, Deloitte & Touche, annually
reviews claim reserves and program effectiveness as part of our annual financial audit. For each
year that the TPA has been used, Deloitte & Touche has made positive comments about the
Workers’ Compensation claim management program.

We understand the need for periodic assessment of program effectiveness. In 1999 the Risk
Management Department will conduct a Best Practices Study of Workers' Compensation Program
Administration in Public Housing Authorities. We will identify 3 to 5 large housing authorities to
study and compare Workers' Compensation Program activity. New York City Housing Authority
and Los Angeles will be included in this Best Practices Study. The goal will be to determine the
quality of our Workers' Compensation claim management program compared with other large
public housing authorities. If the CHA program can be improved, based on this study, we will
implement corrective or improvement actions.

                    200 West Adams, Suite 2102 Chicago, Illinois 60606
                         Telephone (312) 674-4152 Fax (312) 368-1558

Page 2

Mr. Richard Urbanowski
Re: CHA Risk Management Draft Observations
October 14, 1998


Tracking Hazardous Conditions



                                            Page 163                               99-CH-201-1801
Appendix A


We have developed procedures to adequately track hazardous conditions at CHA properties. We
have not successfully implemented these procedures due to staff turnover in Risk Management
and Customer Service.

In the 4th quarter of 1998 and 1999 we will refocus our safety resources to work closely with
Customer Service on hazard identification, work order generation and work order tracking. This
will allow Risk Management to track the progress of individual work orders or the early
identification of hazard trends.

Additionally, we will immediately make the following changes to our self-inspection process:
• Modify the self-inspection form to allow for more detailed work order narrative information
   to be captured at the time of inspection.
• Train Risk Management and Development inspectors on hazard documentation and the need
   for proper work order entry and tracking.
• Develop a meeting schedule with Customer Service and Risk Management to review work
   order progress and identify process issues.
• Document the procedure in place for Risk Management self-inspections and work order
   tracking to reduce hazards.

Resident Safety Training

The Risk Management department at CHA has developed a plan to improve resident awareness
and training to reduce liability hazards on our properties. Due to staff turnover, implementation
of these plans has not been as active as we would have wished. Our safety staff is now in place
and making strides toward the implementation of resident safety awareness training.

The CHA has begun a consistent approach toward resident safety and personal risk management
education. We are initially focusing our efforts on our senior buildings. In 1999 we will be
expanding this effort into family buildings and scattered site locations.




Page 3
Mr.   Richard Urbanowski
Re:   CHA Risk Management Draft Observations
October 14, 1998


To date, Risk Management has worked closely with Housing Management to develop emergency
plans for 35 senior buildings. These plans outline the procedure residents and staff must follow in
emergency situations such as fire, severe weather, civil disturbance and bomb threats.

99-CH-201-1801                               Page 164
                                                                                       Appendix A


Additionally, emergency training has occurred at 2 of these buildings with an additional 15
training sessions scheduled for the 4th quarter of 1998.

Our plans for 1999 are to expand resident safety training to other CHA locations. This training
will encompass a variety of delivery methods including mailings, video presentations and poster
contests. Our 1999 Risk Control Work Plan will detail the safety initiatives targeted for residents.
The Risk Control Work Plan for 1999 will be finalized by December 15, 1998.

Summary

The CHA Risk Management Department is making steady progress in improving the risk control
and claim management activities inherent in our operations. Significant operational process
improvement has occurred since the initial HUD IG Audit in 1996. Further improvement will
occur in 1999. This improvement is being realized through the reduction in claims for general
liability and automobile accidents related to our operations.

Additional response will be developed upon the receipt of the final HUD IG Audit report.


Sincerely,



John Smolk, CPCU, ARM
Director, Risk Management
Chicago Housing Authority




                     The Chicago Housing Authority


October 14, 1998

Anne- Marie Vanderberg
Senior Auditor
Department of Housing and Urban Development

                                             Page 165                                99-CH-201-1801
Appendix A


Office of Inspector General
77 W. Jackson Blvd. Suite 2646
Chicago, Illinois 60604-3507

Dear Ms. Vanderberg:

Attached are the comments in response to your draft observations and recommendations from
your review of the Chicago Housing Authority's Section 8 Program.

On the first page of the Section 8 Program a reference is made to the OIG review dated
September 30, 1996. This may be an error since the problems noted were prior to CHAC's
administration of the program beginning December 1995.

After reviewing our comments if you need any additional clarification or explanation please
contact me at 791-8500 x 4169.


Sincerely,


Sharon Glenn
Section 8 Contract Administrator

Attachments




             626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8500

                               CHICAGO HOUSING AUTHORITY

Response to Recommendation 20A. CHAC is to establish procedures and controls to reduce
error rate on the calculation of tenant contributions to the level permitted by the contract.

CHAC has addressed this issue by revising their procedures in the following manner in
order to comply with the contact.

In the case of Total Tenant Payment (TTP), error rates are way down since the removal of the
effect of compounding errors, which was done retroactively to April 1998.1 Before the
retroactive adjustment, error rates for April and May were 18% and 15% respectively. After the

99-CH-201-1801                                Page 166
                                                                                       Appendix A


adjustment, they dropped to 2% and 0% respectively. June's error rate was 2% and July was 0%.
The rationale for this change in was to eliminate compounding errors and the double and triple
counting of a single error. For example, a minor error in income verification might result in a
TTP "error", even though the TTP arithmetic is correct.

When CHAC began their operation in 1995, we established a formal Quality Control review
process and have monitored the results closely. We have held numerous QC training sessions and
issued several procedure notices on issues related to improving quality. Effective at the beginning
of 1998, we have strictly enforced a procedure requiring all error rates to be reduced steadily to
not greater than the CHA's contractual standards as December 1998. This means that, on a
quarterly basis, each Housing Specialist is advised of their error rates in seven key areas: 1)
eligibility/preference; 2) income verifications; 3) TTP/Tenant Rent Calculations; 4) HAP
calculation; 5) rent reasonableness documentation; 6) 50058 completion and 7) data entry.
Failure to show improvement in error rates from previous quarter results in progressive
disciplinary action. Then, beginning with the first quarter of 1999, progressive discipline will be
imposed on all staff who has error rates above the standards in any of the following categories:

•   Eligibility/preference                     2%
•   Income verification                       14%
•   TTP/Tenant Rent Calculation                5%
•   HAP calculation                            5%
•   Rent reasonableness documentation          5%
•   50058 complete                            10%
•   data entry                                 6%

Since we began to initiate the progressive discipline process in 1998 there has been a reduction in
error rates in all of these categories. In the area of TTP/Tenant Rent Calculation, we continue to
maintain our overall rates at near 0%. It is important to note that our standards are very high, and
our method of capturing error rates is formal and strict than what is typical at other PHAS.

Response to Recommendation 20B. CHA should formally assess the efficiency and
effectiveness of the CHAC contract before the contract is renewed in April 2000.

CHA and HUD monitor and review CHAC's performance in compliance with the contract on a monthly
and quarterly basis. In addition CHAC will provide SEMAP scores by November 1, 1998.

We have identified this as a project we would RFP in 1999 for the contractor to thoroughly
research, collect data and make a comparison of CHAC's administration of the program. The
RFP will require the contractor to develop a benchmarking methodology to "artificially" create a
way to measure what we have accomplished against a reasonable standard. in addition the
contractor would compare our program costs to other programs around the country adjusting for
size and local economic differences.




                                             Page 167                                99-CH-201-1801
Appendix A




                           CHICAGO HOUSING AUTHORITY
                               Office of Human Resources

                                       CONFIDENTIAL


TO:              Richard Urbanowski
                 Senior Auditor, HUD

FROM:            Sharon Cruse Boyd
                 Director, Human Resources


99-CH-201-1801                               Page 168
                                                                                         Appendix A


DATE:          October 14, 1998

SUBJECT:       Response To The OIG Report



This is in response to the September 30, 1996, OIG review. The OIG report states that we were
only able to comply fully with three (3) recommendations which were: 1) assuring that all
Authority managers have met HUD certification requirements, 2) the development and
implementation of the Performance Management Program and 3) the utilization of qualified
Training Professionals. However, in addition to these we have also accomplished the following:

A.      We have complied with another recommendation, the development of an effective
recruiting strategy that properly assessed the qualifications of potential employees (p. 1, 2nd
parag ). As a point of clarification, a recruiting strategy does not assess qualifications but rather,
it determines the methodology ( including sources used) by which potential employees will be
identified. We have:

·   A validated accredited testing instrument that measures the reading and math skills of
    potential employees,
·   We have accurate job descriptions which raised the minimal requirements
·   Expanded our sources to include the Internet, professional associations and job fairs.

Our assessment/evaluation of potential employees was accomplished through the following:

·   performance ratings
·   exit interviews
·   turnover analysis
·   PHMAP

B.     We have also complied with the recommendation regarding, the establishment and
implementation procedures to consolidate the employees' training. While a database has
been established, MIS has been unable to provide us with their training data so that we can
consolidate the information.

C.       Finally, we have also complied with the sixth recommendation: update all job
descriptions and complete the implementation of a compensation system that was
developed as a result of a 1994 consultant ( Hay ) study. Prior to 1997 the Authority had over
900 job descriptions. Over 600 of these descriptions were targeted for the Hay conversion. The
Hay analysis involved the reduction and consolidation of job titles. The resultant 350 job
classifications were implemented in January of 1997. Employees were given the opportunity to
appeal the newly written descriptions. Any pending descriptions (p. 1, parag. 3 ) are a result of
on-going reorganizations and newly created jobs.



                                               Page 169                                99-CH-201-1801
Appendix A




                   The Chicago Housing Authority

October 20, 1998

Anne-Marie Vanderberg
Senior Auditor
Department of Housing and Urban Development
Office of Inspector General
77 W. Jackson Blvd., Suite 2646
Chicago, IL 60604


99-CH-201-1801                          Page 170
                                                                                             Appendix A


Re: Resident Program Delivery Systems

Dear Ms. Vanderberg:

I have reviewed the observations and recommendations regarding Resident Program Delivery
Systems as outlined in your October 9, 1998 letter, I am in concurrence with all of the
observations and recommendations with the exception of the statement regarding Urban Planning
Contract extension. I have attached documentation that indicates that contracts were extended
prior to the expiration date and that vendors were notified of the extensions. In order to ensure
that additional documentation is on file, in the future we will send form letters to vendors and
place a copy in their file.

Attached you will find a copy of the communication between the Department of Purchasing and
the Development Initiatives Division that establishes the request for an extension period which is
on file in the Purchasing Office. Additionally, we have attached a print out of the accounting
system records that indicates the original contract start date and the amended expiration date.

If I can be of further assistance please feel free to contact me at (312) 791-8500 ext. 4602.

Sincerely,


Edward Moses
Deputy Executive Director


C:     Greg Russ
       Wanda White



              626 West Jackson Blvd. - Chicago, Illinois 60661 - Telephone (312) 791-8500

                       The Chicago Housing Authority


October 21, 1998

Anne-Marie Vanderberg, Senior Auditor
Office of Inspector General
U.S. DEPARTMENT OF HOUSING & URBAN DEVELOPMENT (HUD)
77 West Jackson Boulevard, Suite 2646
Chicago, Illinois 60604-3507

Dear Ms. Vanderberg:

                                              Page 171                                      99-CH-201-1801
Appendix A



This letter is in response to your correspondence of October 15, 1998 regarding CHA's Hope VI
Program.

The CHA Department of Grant Administration provided the HUD auditor with substantial
documentation of CHA efforts to monitor and track HOPE VI grant funding awarded to the CHA
Office of Programs.

The following addresses the specific issues raised in your correspondence of October 15, 1998.

I.      Item 1 [Page 5, paragraph 1]:"The reviewers (Grant Administrator) did not always
follow Grant Administration's monitoring procedures. The monitoring procedures requires staff
to interview service recipients during the semi-annual site visits."

Response to Item 1: This statement is inaccurate. The CHA Department of Grant
Administration Policies and Procedures (from June 1 996 to Present) does not stipulate that
service recipients are to be interviewed during the semi-annual site visit. The primary purpose of
a semi-annual site visit is to assess the fiscal and programmatic functioning of the grant and to
make a determination on whether the grant is in compliance with the terms and conditions of the
award. This determination can be made by reviewing documentation, records, and/or
participating in program activities for observation purposes. Therefore, grant administrators are
not required to interview program participants and do not have to interview program participants
to make a determination.

II.    Item 2 [Page 5, paragraph 1]: ". . . the reviewer relied upon unverified statements from the
program staff to conclude that an objective was achieved.

Response to Item 2: The CHA Works program objective referenced in Item 2 states that the



                 626 West Jackson Boulevard & Chicago, Illinois 60661-5601 (312) 791-8500
 program will "provide classroom and hands-on training emphasizing, but not limited to, the
construction trades". The Grant Administrator did many things to determine the programs
compliance with this (as well as other) program objective(s). The Grant Administrator noted that
CHA Works documented its efforts via individual participant files, participant rosters, and
participant evaluations but failed to maintain documentation in individual participant files on
classroom instruction. It was therefore noted in the site visit report that ". . . copies of certificates
were not maintained in program files". Since the classroom instruction was a component of the
objective, this Grant Administrator assessed the program to be in compliance, weighing the hands-
on training proportionally.

III.    Item 3 [Page 5, paragraph 3]: "The Grant Administration Division did not always have consistent
conclusions throughout its reviews... the reviewer concluded in one part of the review that progress was
being made to recruit and train program participants. The reviewer reported that she could not make a


99-CH-201-1801                                   Page 172
                                                                                             Appendix A

determination if the goal would be met. However, in another part of the review the reviewer reported that
the goal would not be met."

Response to Item 3: This is inaccurate. The Grant Administrator did not state anywhere in the
In-depth Site Visit Report for Cabrini Textile Works on February 1 3, 1998, that 'progress was
being made to recruit and train program participants" (copy of the report is being submitted for
your review). Grant Administrator was consistent in marking "unable to make determination"
under 'No" or 'Non-Compliant" columns for the programmatic assessment related to recruiting
and training of the Cabrini Textile Works participants.

IV.    Item 4 [Page 5, paragraph 1]: "We found the Grant Administration Division did
not adequately monitor the programs".

Response to Item 4: While it may be true that this department experienced some unique
challenges in attempting to obtain sufficient and material information in a timely manner for in-
depth site visits, Grant Administration has made a great effort to assess the above programs fairly
and adequately. This was well documented in 1994 HOPE Program files.

As an additional mechanism for program discrepancies, CHA Department of Grant Administration
drafted an Unresolved Site Visit Finding report detailing all unresolved findings in April 1 998.
Grant Administrators were required to meet with the responsible program staff to address the
unresolved findings. This would ensure that site visit findings would be resolved timely.

Again, if you should have any questions or need further information, do not hesitate to contact me
at (312) 674-4415.

It is important to note that the HUD auditor reviewed records that documented the challenges
with tracking and monitoring HOPE VI. These challenges were addressed in detail in the HOPE
VI files.

                626 West Jackson Boulevard & Chicago, Illinois 60661-5601 (312) 791-8500
Grant Administration is currently in the process of developing a corrective action plan to address
the issues of the HUD auditor. This plan will be developed and implemented by Grant
Administration within the next 60 days.

Sincerely,



Denise Eligan
Director, Grant Administration



Attachments


                                                 Page 173                                  99-CH-201-1801
Appendix A


cc:    Ed Moses, Deputy Executive Director, Programs
       Greg Russ, Deputy Executive Director, Finance &
              Adminstration
       Andy Rodriguez, Redevelopment
       lbraham Mansuri, Modernization
       Lisa Schneider, MAP
       Greg Whipple, MAP




                 626 West Jackson Boulevard & Chicago, Illinois 60661-5601 (312) 791-8500

                       The Chicago Housing Authority
October 26, 1998

Anne-Marie Vanderberg
Senior Auditor
Dept. of Housing and Urban Development
77 West Jackson Blvd. Suite 2646
Chicago, Illinois 60604-3507

RE: Responses to HOPE VI Audit

Dear Ms. Vanderberg:




99-CH-201-1801                                   Page 174
                                                                                              Appendix A

The Office of Community Relations and Involvement has reviewed your follow-up review of the Chicago
Housing Authority internal controls over he HOPE VI self-sufficiency programs and our responses are as
follows:

Observation
Inadequate System of Controls to ensure that projects funded by HOPE VI achieved
program goals.

The Development Initiatives Division became responsible for coordination and reporting of all HOPE VI
Self-Sufficiency programs m September of 1997. However, the reporting systems designed did not account
for inter-divisional program operations. As such, the procedures developed were not consistent throughout
the operating divisions in relation to reporting format and file documentation. Additionally, Hope VI staff
assigned to Development Initiatives was inadequate to ensure appropriate training of other program staff
and lacked the capacity to develop written procedures.

Recommendations
Develops policies and procedures to ensure accurate reporting of self-sufficiency program
progress.

Response
The Development Initiatives Division will create a policies and procedures manual for the implementation
and operation of HOPE VI Self-sufficiency programs. The Division will conduct a training session with all
departments responsible for program implementation.

The Development Initiatives Division will ensure that all HOPE VI program goals are included in a
separate category of the Management by Objectives (MBOS) report for each Department or Division
engaged in HOPE VI. The Assistant Executive Director will review all HOPE VI MBOs for compliance.




                626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8500
Hope VI Self-Sufficiency project staff will complete weekly status reports for submission to the HOPE VI
Program Coordinator. Project staff will maintain individual client files on each program participant that
includes a client profile and program progress checklist.

Recommendation
Follows monitoring procedures

Response
The Development Initiatives Director will ensure that the Community Redevelopment Department hires and
trains HOPE VI Program Coordinators. Program Coordinators will have responsibility for the weekly
monitoring and documentation of HOPE VI Self-Sufficiency Programs.                  Additionally, Program
Coordinators will review project staff monthly activity reports, conduct Bi-monthly file reviews and
prepare monthly program progress reports on each self-sufficiency project activity.

Should you have any questions or require additional information you may contact me at
312-791-8500 x4602.
                                                Page 175                                     99-CH-201-1801
Appendix A




Sincerely,


Ed Moses
Deputy Executive Director



Cc:   Joseph Shuldiner
       Wanda White




                 626 West Jackson Boulevard - Chicago, Illinois 60661-5601 - (312) 791-8500

                         The Chicago Housing Authority
October 26, 1998

Mr. Richard Urbanowski
Senior Auditor
Department of Housing and Urban Affairs
Office of Inspector General
77 W. Jackson Blvd., Suite 2646
Chicago, Illinois 60604-3507

Re: CHA response to draft observations of HUD IG follow up


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Dear Mr. Urbanowski

Attached is the Chicago Housing Authority's response to the draft observations/issues identified
by the HUD Office of Inspector General during the follow-up review of the Authority. The
following observations have been addressed in this correspondence:

Draft Observation - Housing Management, Work Orders
Draft Observation - Chapter 8 - Housing Management Functions
Draft Observation - Chapter 9 - Admissions and Evictions
Draft Observation - Housing Management, Vacancy Reduction/Unit Turnaround

Please review the attached responses and if you have any questions or need additional
information, please contact George Phillips, Director of Housing Management or Greg Whipple,
Management Analysis and Planning.

Sincerely,

Thomas L. Harkless
Assistant Executive Director, Operations




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WORK ORDER SYSTEM

Observations

· The Authority did not assure that all maintenance staff received the maintenance manual.
  According to the Customer Service Center Manager, the maintenance manual was given to
  staff when they attended training on the work order system. We interviewed 45 employees
  from one privately and two Authority managed developments to determine if the staff received
  the maintenance manual. Eleven of the 45 employees said they did not receive the manual.
  The Authority could not provide an explanation as to why the employees did not receive a
  copy.

HUD Recommendation 3A
Revise its work order procedures to address work orders not generated when received and to
include steps that ensure code violation packages from the City of Chicago are immediately
reviewed to identify emergency conditions for immediate input to the work order system.

CHA Response
The Authority shall revise its work order procedures to address work orders not generated when
received and to include procedures that ensure code violations from the City of Chicago are
properly recorded and completed.

Completion Date: 03/31/99

HUD Recommendation 3B
Distribute the maintenance manual to applicable personnel.

CHA Response
All applicable Housing management staff shall receive the Authority's preventive maintenance
manual by March 31, 1999. Housing Management procedures shall be revised to ensure
maintenance manuals are properly disseminated.

Completion Date: 03/31/99

HUD Recommendation 3C
Develop a plan to reduce its backlog of outstanding work orders.

CHA Response
The Authority is currently revising it's procedures to ensure outstanding work orders are
addressed and completed in a timely manner.

Completion date: 03/31/99




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VACANCY REDUCTION/UNIT TURNAROUND

Observations

· Although the Authority implemented a system for tracking unit turnaround time from date of
  vacancy to reoccupancy, the information was incomplete and inaccurate and as a result was not
  used by development managers. The Authority did not develop procedures to verify that
  rehabilitated units met HUD's Housing Quality Standards. Also, the Authority did not develop
  coordination procedures between the Force Account Labor Department, Occupancy
  Department, and the Development Managers.

· The Authority did not develop procedures to ensure that rehabilitated units meet HUD's
  Housing Quality Standards. Rehabilitation of vacant units is currently performed by the
  Modernization Division's Force Account Labor Department.           Previously, units were
  rehabilitated under the Vacancy Reduction Program which ended in September 1997.

· There were no coordination procedures between the Force Account Labor Department,
  Development Managers, and the Occupancy Department regarding the prioritization of units to
  rehabilitate based on the greatest demand. There was also no coordination regarding the
  availability of rehabilitated units.

Recommendations

HUD Recommendation 5A
Implement an effective system for tracking of unit turnaround time.

CHA Response
The Authority is currently revising it's CCS computer system records to include tracking the
number of days units were vacant prior to repair/rehabilitation, the time to repair each unit and the
time it took to reoccupy a unit after is was repaired.

Completion Date: 06/30/99

HUD Recommendation 5B
Develop procedures to verify that rehabilitated units meet HUD's Housing Quality
Standards.

HUD Recommendation 5C
Develop coordination procedures between the Force Account Labor Department, Development
Managers, and the Occupancy Department.             The procedures should ensure units are
repaired/rehabilitated on the basis of demand and applicable personnel are aware of projected
completion dates so units can be promptly occupied.




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CHA Response
On October 13, 1998, the Authority restructured its major departments and now both Housing
Management and the Modernization division report to the Assistant Executive Director of
Operations. This change will help to ensure a coordination between Force Account, Development
Managers and Occupancy. New procedures will be completed by March 1999.

Completion Date: 03/31/99

HOUSING MANAGEMENT FUNCTIONS

Observations
· The Authority did not identify the major housing functions, and it did not review the
  effectiveness of actions taken to delegate responsibilities to the developments.

· The Director of Housing Management said the Authority identified additional major housing
  functions during the reorganization of the Housing Management Division. However, the
  Authority could not provide any documentation to support what the additional functions were
  or that they had been evaluated for effectiveness and efficiency. As a result, HUD lacks
  assurance that the Authority has assessed the cost effectiveness and efficiency of its housing
  management functions.

· The Authority did not review the results of actions taken to delegate responsibilities to the
  developments. The Director of Housing Management believed insufficient time had elapsed
  since the reorganization of the Authority's Housing Management Division. The Director said
  the reorganization was not fully implemented until November 1997. The Director believed that
  a review of the delegation of responsibilities would not be useful until the reorganization has
  been in effect for at least one year. We agree with the Director's conclusion to wait for one
  year after the reorganization. The Authority should review its delegation decisions beginning
  in December 1998.

HUD Recommendation 8A
Assess the recommendations in the consultant's May 4, 1998 discussion paper and
implement those that will reduce overhead costs and decentralize management.

CHA Response
The Authority has reviewed the consultant's recommendations and shall implement
recommendations that are believed by the Authority to reduce overhead costs and further
decentralize management. Because the Authority is currently in the process of selecting new
private management firms, the Authority is requesting that the completion time for this
recommendation is extended to June 30, 1999.

Completion Date: 06/30/99

HUD Recommendation 8B
Implement site-based management plans for each of its developments.

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CHA Response
Because of the importance of site-based management plans, the Authority is continuing to review
the process to ensure all Authority departments are properly coordinated. This includes the
Authority's centralized computer system.

Completion Date: 06/30/99

HUD Recommendation 8C
Complete the identification of major housing functions in order to evaluate the functions'
cost effectiveness and efficiency.

CHA Response
The Authority has identified the major housing functions and shall complete an
evaluation of each function's efficiency and effectiveness.

Completion Date: 06/30/99

HUD Recommendation 8D
Reviews the results of actions taken to delegate responsibilities to the developments.

CHA Response
The Authority shall complete the review of the results of actions taken to delegate
responsibilities to the developments.

Completion Date: 06/30/99

Admissions and Evictions

Observations

· The Authority did not develop procedures to coordinate potential evictions and the need for
  social services. Also, the Authority's resident lease did not contain provisions required by
  HUD. Further, the Authority did not develop a site-based resident orientation manual and
  implement a site-based resident orientation process.

· The Authority did not develop procedures for Development Managers and the Social Services
  Division to coordinate potential evictions and the need for social services. The Director of
  Housing Management and the Assistant Director of Operational Services said coordination
  procedures were not developed due to other priorities.

· The Authority did not develop a site-based resident orientation manual, nor did it implement a
  site-based resident orientation process. The Director of Housing Management and the
  Assistant Director of Operational Services said the orientation manual and related process
  were not developed due to other priorities.


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HUD Recommendation 9A
Develop procedures for Development Managers and the Social Services Division to
coordinate on potential evictions and the need for social services.

CHA Response
The Authority is currently revising it's procedures to ensure coordination between
Development Managers and outside social service agencies.

Completion date: 03/31/99

HUD Recommendation 9B
Revise its resident lease to provide for a waiver of grievance procedures for evictions involving
any activity, not just criminal activity, that threatens the health, safety, or right to peaceful
enjoyment of the premises by other tenants or housing authority employees.

CHA Response
This recommendation is being reviewed by our Legal department and if not precluded by
law will be presented to the CHA executive staff.

Completion Date: 03/31/99

HUD Recommendation 9C
Develop a site-based resident orientation manual and implement a site-based resident
orientation process.

CHA Response
The revised site-based resident orientation manual will be completed the first quarter in
FY99.

Completion date: 03/31/99




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                           CHICAGO HOUSING AUTHORITY
                                EXECUTIVE OFFICES
                               Inter-Office Memorandum


TO:           Richard Urbanowski
              HUD IG

FROM:         Maggie Stewart, Acting Director
              Asset Management

DATE:         October 26, 1998

SUBJECT:      RESPONSE TO RECOMMENDATION: ASSET MANAGENT



I have reviewed the observations and recommendations for the HUD IG Auditor and concur with
its findings. Please note that the Chapter reviews issues related to both Asset Management and
the CHA pension fund. This memorandum addresses the recommendations associated with the
Asset Management Department.

HUD Recommendation 14A
Established policies and procedures for monitoring the private management firms

The Authority has reviewed past practices and procedures to monitor the private management
firms contracted for management of CHA properties assigned to their portfolio. Procedures will
be written and compiled, and staff will be trained to ensure contract compliance and proper
monitoring controls are in place.
Completion Date: 03/31/99

HUD Recommendation 14B

Analyze the consultant's May 8, 1998 report on private management and take appropriate
actions.

The Department has reviewed the ABT report and recommendations on the structure and
functions of Asset Management. The Department has been restructured and will analyze and
implement the recommendations set forth in their report. A workplan will be developed to
address the actions recommended in the report.




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Distribution
Acting Secretary's Representative, Midwest
Assistant General Counsel, Midwest
Field Comptroller, Midwest
Director of Field Accounting, Midwest
Director of Public Housing, Illinois State Office (2)
Director of Administrative Service Center, New York State Office
Assistant to the Deputy Secretary for Field Management, SDF (Room 7106)
Chief Financial Officer, F (Room 10164) (2)
Deputy Chief Financial Officer for Finance, FF (Room 10164) (2)
Acquisitions Librarian, Library, AS (Room 8141)
Public and Indian Housing - Management Analyst - PF (Room P8202)
General Counsel, C (Room 10214)
Deputy Secretary (Room 10100)
Assistant Secretary for Congressional and Intergovernmental Relations, J (Room 10120)
Deputy Assistant Secretary for Public Affairs, W (Room 10220)
Deputy Assistant Secretary for Operations, A (Room 10110)
Chief of Staff, S (Room 10000)
Director, Office of Budget, ARB (Room 3270)
Counselor to the Secretary, S (Room 10234)
Senior Advisor to the Secretary for Communications and Policy, S (Room 10222)
Assistant Secretary for Public and Indian Housing, P (Room 4100)
Assistant to the Secretary for Labor Relations, (Acting), SL (Room 7118)
Audit Liaison Officer of the Assistant Secretary for Public and Indian Housing, PF (Room 5156)
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; Attn: Judy England-Joseph
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
Mr. Joseph Shuldiner, Executive Director, Chicago Housing Authority




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