oversight

Springfield Metro. HA, Springfield, Ohio

Published by the Department of Housing and Urban Development, Office of Inspector General on 1998-10-09.

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

                                                                       Issue Date
                                                                               October 9, 1998
                                                                       Audit Case Number
                                                                               98-CH-202-1001




TO:            Thomas S. Marshall, Director, Public Housing Hub, Cleveland Area Office


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

SUBJECT:       Springfield Metropolitan Housing Authority
               Comprehensive Audit
               Springfield, Ohio

We completed an audit of the Springfield Metropolitan Housing Authority. We selected the Authority
for audit based on a congressional request and the request of HUD’s Ohio State Office. They were
concerned about the deterioration in the Authority’s operations. The objectives of our audit were to
determine whether the Authority administered its programs in an efficient, economical manner, and in
compliance with the terms and conditions of the Annual Contributions Contract, applicable laws, HUD
regulations, and other applicable directives. The audit did not include the Drug Elimination Grant or
the Family Self-Sufficiency Program.

We found the Authority’s operations were not being administered in an efficient and economic manner,
and in accordance with program requirements and the Annual Contributions Contract. The Executive
Director did not always follow HUD’s requirements or the Authority’s own policies; and the Board of
Commissioners did not always assure that the Authority’s operations were carried out in an efficient
and economic manner. The Authority had frequent turnover of key management personnel, and did
not have a plan to facilitate continuity of operations. Specifically, the Authority did not: (1) follow
proper payment procedures and the Executive Director did not exercise sound judgment when he
approved disbursements of $38,437 for ineligible and unsupported expenses; (2) maintain an acceptable
occupancy level because the Authority did not give priority to preparing vacant units for re-rental. The
Executive Director allowed maintenance employees to be used for non-maintenance functions; (3)
conduct quality control reviews of Section 8 units inspected by its inspectors and assure that its
inspectors were properly trained; (4) follow proper procurement practices because the Executive
Director had not assigned one specific upper level management official to be responsible for the
practices; (5) use $95,558 of modernization grant funds in an efficient manner; (6) correctly charge all
physical and management improvement costs to the benefiting programs; (7) follow HUD’s travel
policy requirements; (8) adequately document the method it used to allocate its indirect costs to the
various programs; and (9) not maintain an adequate system of internal controls to safeguard its assets.
Management Memorandum


Within 60 days, please give 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
corrective action is considered unnecessary. Also, please furnish us copies of any correspondence or
directives issued as a result of the audit.

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




99-CH-202-1001                                Page ii
Executive Summary
We completed an audit of the Springfield Metropolitan Housing Authority. We selected the Authority
for audit based on a congressional request and the request of HUD’s Ohio State Office. They were
concerned about the deterioration in the Authority’s operations. The objectives of our audit were to
determine whether the Authority administered its programs in an efficient, effective, economical
manner, and in compliance with the terms and conditions of the Annual Contributions Contract,
applicable laws, HUD regulations, and other applicable directives. The audit did not include the Drug
Elimination Grant or the Family Self-Sufficiency Program.

We found the Authority’s operations were not being administered in an efficient and economic manner,
and in accordance with program requirements and the Annual Contributions Contract. As evidenced
by the ten findings in this report, the Executive Director did not always follow HUD’s requirements or
the Authority’s own policies; and the Board of Commissioners did not always assure that the
Authority’s operations were carried out in an efficient and economic manner.


                                       The Springfield Metropolitan Housing Authority did not
 The Authority Was Not
                                       have controls to assure HUD’s requirements were complied
 Operated According To
                                       with. This occurred because the Executive Director did not
 Program Requirements
                                       always follow HUD’s requirements or the Authority’s own
                                       policies and the Board of Commissioners did not assure that
                                       the Authority’s operations were carried out in an efficient
                                       and economic manner. In addition, the Authority also had
                                       frequent turnover of key management personnel and it did
                                       not have an adequate personnel evaluation system. As a
                                       result, HUD lacks assurance that the Authority’s resources
                                       were used to the maximum extent to benefit its residents.

                                       The Housing Authority disbursed $38,437 for ineligible and
 The Authority Paid                    unsupported expenses. Specifically, the Authority paid: (1)
 $38,437 for Ineligible and            $25,690 to an apparently nonexistent company for materials
 Unsupported Costs                     never received; (2) $1,000 to the former Maintenance
                                       Director for an improper Boom rental; (3) $6,755 to an
                                       elevator company for parts never received; (4) $2,692 to the
                                       former Maintenance Director for unsupported costs; and (5)
                                       $2,300 for expenses not related to the Authority’s
                                       operations.

                                       The Housing Authority had an excessive number of vacant
 The Authority Has An                  units. Ninety three of its 889 available units or 10.5 percent
 Excessive Number of                   were vacant despite having 312 applicants on the waiting
 Vacant Units                          list. The excessive vacancy problem started in 1997 when
                                       the Authority did not give priority to preparing vacant units
                                       for re-rental. As a result, excessive vacancies caused the
                                       Authority to lose about $121,000 in rental income in 1997.
                                                Page iii                              99-CH-202-1001
Executive Summary



                              The Housing Authority did not assure that its inspectors
 Section 8 Unit Inspections   conducted adequate inspections of Section 8 units. Seven
 Were Not Adequate            of the eight Section 8 units inspected by us and the
                              Authority’s fee inspector did not meet HUD’s Housing
                              Quality Standards and contained 61 violations. These
                              deficiencies existed because the Authority did not: (1) carry
                              out a quality control program to review the quality of
                              inspections done by its inspectors; (2) provide training to
                              its inspectors; and (3) adequately evaluate the annual
                              performance of the inspectors. In addition, the Authority
                              did not require the owners of Section 8 units that failed
                              Housing Quality Standards to correct the unit deficiencies in
                              a timely manner. As a result, Section 8 units were not
                              decent, safe, and sanitary.

                              In addition to the above findings, the Housing Authority did
 Additional Findings Of       not:
 Noncompliance With
 Program Requirements         •   comply with HUD’s and its own procurement policies.
                                  This occurred because the Authority did not have one
                                  specific upper level management person responsible for
                                  the procurement process.

                              •   use its modernization (comprehensive) grant funds in an
                                  efficient manner. As a result, the Authority incurred
                                  costs of $95,558 that were unnecessary or unsupported.

                              •   correctly charge the benefiting program for the total
                                  costs of improvements to its computer and telephone
                                  system as required by HUD. Instead the Authority
                                  charged the costs to the Comprehensive Grant Program.
                                  The improvements benefited both the Public Housing
                                  and Section 8 Programs.

                              •   assure that its travel policy was comparable with local
                                  practice, as required by the Annual Contributions
                                  Contract. In addition, the Authority did not always
                                  follow its own travel policy. The Authority did not
                                  always: (1) obtain Board approval prior to authorizing
                                  the travel; and (2) have supporting documentation for all
                                  travel advances paid to the travelers.




99-CH-202-1001                    Page iv
                                                          Executive Summary


                  •    have documentation to support the allocation of indirect
                       payroll and administrative costs to the various programs
                       it operated. It allocated the indirect costs based on
                       unsupported budget estimates and past practice.

                  •    have effective controls to safeguard its assets. The
                       Housing Authority’s management had not given
                       adequate attention to implement effective procedures
                       and controls.

                  We recommend that HUD’s Director of the Public Housing
Recommendations   Hub in the Cleveland Office, based on the findings in this
                  report, assess the performance of the Authority’s Executive
                  Director and Board of Commissioners and take appropriate
                  administrative actions. In addition, we recommend that the
                  Director requires the Springfield Metropolitan Housing
                  Authority to develop an overall plan for the Authority’s
                  direction and that HUD uses the plan to monitor the
                  progress of the Authority to improve its operations and to
                  ensure its direction remains consistent. We also recommend
                  the Director of the Public Housing Hub assures that the
                  Authority implements corrective actions to correct the
                  weaknesses in its disbursements procedures; modernization
                  activities; Section 8 inspections; vacancy reduction
                  operation; procurement activities; internal controls; travel
                  policy and procedures; and its allocation of indirect costs.

                  We provided our draft findings to the Authority’s Executive
                  Director and HUD’s staff during the audit. We held an exit
                  conference on September 11, 1998 with the Authority’s
                  staff. The Authority provided written comments to our
                  findings. We considered the comments in preparing our
                  report. The Authority’s comments are included in their
                  entirety in Appendix B.




                      Page v                                    99-CH-202-1001
Table of Contents

Management Memorandum                                                      i


Executive Summary                                                       iii


Introduction                                                            1


Findings

1    The Authority Was Not Operated According To
     Program Requirements                                               3


2    The Authority Paid $38,437 For Ineligible and
     Unsupported Costs                                                 13


3    The Authority Has An Excessive Number of Vacant Units             21


4    Section 8 Unit Inspections Were Not Adequate                      27


5    The Authority Did Not Follow Proper Procurement
     Practices                                                         39


6    The Authority Used Modernization Grant
     Funds In An Inefficient Manner                                    47


7    The Authority Incorrectly Charged Costs To The
     Comprehensive Grant Program                                       55


8    The Authority Did Not Follow Travel Requirements                 59




                                 Page vii                    99-CH-202-1001
Table of Contents


9      The Authority Could Not Support Its Allocation of
       Indirect Costs                                       65


10     The Authority Needs To Improve Its Controls For
       Safeguarding Assets                                  69



Management Controls                                        77


Follow Up On Prior Audits                                  79



Appendices
        A Schedule of Questioned Costs                     81

        B Audit Comments                                   83

        C Distribution                                     119




99-CH-202-1001                  Page viii
Introduction
The Springfield Metropolitan Housing Authority was organized in 1961 under the laws of the
State of Ohio to develop, and operate low income housing programs. The Authority is governed
by a Board of Commissioner’s consisting of five members appointed as follows: two by the
Springfield City Commissioner; one by the Clark County Board of Commissioners; and two by the
Court of Common Pleas, Probate.

The Authority manages 892 Low-Income Housing Program units, comprised of 430 family units
and 462 elderly units in 13 projects. Three of the units were unavailable for occupancy due to a
need for extensive rehabilitation work. As of August 4, 1998, the Authority managed 992 Section
8 Program certificates and vouchers, 11 Moderate Rehabilitation Program units, and 32 Section 8
new Construction Program units. The Authority also managed Shelter Plus Care and Tenant
Based Assistance Programs consisting of nine vouchers and 10 vouchers respectively. Further,
the Authority managed a Drug Elimination Grant and the Family Self-Sufficiency Program.

The Authority received $2,021,179 in HUD operating subsidies over the last two years. In
addition, the Authority received $4,030,999 in Comprehensive Grant Program funding since
1994. The Authority has not been rated under the Public Housing Management Assessment
Program for 1997 because it has not completed its 1997 financial statements.

The Authority’s books and records are located at 437 East John Street, Springfield, Ohio. The
Chairman of the Board is Sheila Ballard. The Executive Director is Harold Riedel.


                                    Our audit objectives were to determine whether the
 Audit Objectives                   Authority administered its programs in an efficient,
                                    effective, economical manner, and in compliance with the
                                    terms and conditions of its Annual Contributions Contract,
                                    applicable laws, HUD regulations, and other applicable
                                    directives.

                                    To obtain background information, we interviewed HUD’s
 Audit Scope and                    staff from the Ohio State Office in Columbus, Ohio.
 Methodology
                                    During the audit, we interviewed pertinent Housing
                                    Authority staff and evaluated the Authority policies,
                                    procedures, and practices related to: cash disbursements;
                                    receipts; maintenance; occupancy; unit inspections;
                                    procurement; use of modernization funds; travel; indirect
                                    cost charges; and employee evaluations. We inspected eight
                                    Section 8 units to verify the quality of the Authority’s
                                    inspections.

                                    We performed the on-site work at the Housing Authority
                                    between March and August 1998. The audit covered the
                                              Page 1                             99-CH-202-1001
Introduction


                 period of January 1, 1994 through February 28, 1998. We
                 extended the audit period as necessary.

                 We conducted the audit in accordance with generally
                 accepted government auditing standards. We provided a
                 copy of this report to the Housing Authority’s Executive
                 Director and the Chairman of the Board of Commissioners.




99-CH-202-1001    Page 2
                                                                                              Finding 1


The Authority Was Not Operated According To
           Program Requirements
The Springfield Metropolitan Housing Authority did not have controls to assure HUD’s requirements
were complied with. This occurred because the Authority had frequent turnover of key management
personnel and it did not have an adequate personnel evaluation system. In addition, the Executive
Director did not always follow HUD’s requirements or the Authority’s own policies; and the Board of
Commissioners did not always assure that the Authority’s operations were carried out in an efficient
and economic manner. As a result, HUD lacks assurance that the Authority’s resources were used to
the maximum extent to benefit its residents.


                                      Section 201 of the Annual Contributions Contract states that a
 HUD’s Requirements
                                      Housing Authority shall at all times develop and operate each
                                      project solely for the purpose of providing decent, safe, and
                                      sanitary housing for eligible families in a manner that promotes
                                      serviceability, economy, efficiency, and stability of the projects.

                                      The Public and Indian Housing Low-Rent Technical
                                      Accounting Guide, Section II states that to ensure programs
                                      are carried out in an efficient and economical manner, a
                                      housing authority’s controls should include such things as:
                                      clearly defined staff responsibilities and job accountability; a
                                      well-designed management system; effective supervisory
                                      review of operations; competitive procurement procedures; and
                                      well-planned, organized, and supervised maintenance
                                      programs.

                                      HUD’s Program Integrity Bulletin dated November 1990,
 Commissioner’s and
                                      outlines the Commissioner’s and Executive Director’s
 Executive Director’s
                                      responsibilities:
 Responsibilities
                                      Public Housing Authority Commissioners have a responsibility
                                      to HUD to ensure national housing policies are carried out, and
                                      to the Executive Director and staff to provide sound and
                                      manageable directives. The Commissioners are accountable to
                                      their locality and best serve it by monitoring operations to be
                                      certain that housing programs are carried out in an efficient and
                                      economical manner.

                                      The Executive Director’s responsibilities include:



                                                Page 3                                  99-CH-202-1001
Finding 1


                       •     Establishing objectives needed to achieve the goals of the
                             Authority;

                       •     Overseeing the development and implementation of
                             organizational policies and procedures for attaining the
                             Authority’s objectives;

                       •     Carrying out the Commissioners’ policies and managing
                             the Housing Authority’s day-to-day operations. In this
                             capacity, the Executive Director is responsible for keeping
                             the Commissioners informed of operational developments
                             and to provide them with information for future policy and
                             program guidance; and

                       •     Maintaining overall compliance with Federal, State, and
                             local laws, as well as the Authority’s policies and
                             procedures.

                       The Board of Commissioners and the Executive Director did
 Operations Were Not   not adequately exercise their responsibility to manage the
 Effective             Authority in an effective, economic, and efficient manner. As
                       shown in findings 2 through 10 of this report, the Authority:

                       •     Did not follow proper payment procedures and the
                             Executive Director did not exercise sound judgment when
                             he approved disbursements of $38,437 for ineligible and
                             unsupported expenses. Specifically the Executive Director
                             approved $25,690 to an apparently non-existent company
                             for materials never received; $3,692 to the former
                             Maintenance Director for ineligible and unsupported costs;
                             $6,755 to an elevator company for parts never received;
                             and $2,300 for expenses not related to the Authority’s
                             operations. The misuse of the Authority’s funds occurred
                             because the Executive Director did not require verification
                             that the Authority actually received the materials before
                             approving the issuance and signing of the checks. Had the
                             Executive Director followed proper vendor payment
                             procedures, this apparent misuse of funds may not have
                             occurred.

                       •     Experienced a steady increase in its vacancy rate since
                             January 1997, from 5.5 percent to 15.4 percent in March
                             1998. Since March 1998, the vacancy rate has declined
                             but was still excessive at 10.5 percent as of May 31, 1998.
                             The increase in the vacancy rate was due to long delays in

99-CH-202-1001             Page 4
                                                     Finding 1


    preparing a unit for rental and lack of coordination between
    the Maintenance Department and the Housing Operations
    Department. The excessive vacancy problem started in
    1997 when the Authority did not give priority to preparing
    vacant units for re-rental. The Executive Director allowed
    the Maintenance Director to use some available
    maintenance employees for non-maintenance functions,
    such as, renovating a building that the Authority had
    purchased. The Executive Director should have given
    priority to preparing vacant units for re-rental. The Board
    of Commissioners should have questioned the Executive
    Director about the steady increase in the vacancy rate and
    it should have required the Executive Director to develop a
    plan to reduce the number of vacant units.

•   Did not conduct quality control reviews of Section 8 units
    inspected by its inspectors and assure that its inspectors
    were qualified to do the inspections. In addition, the
    Authority did not require the owners of Section 8 units that
    failed Housing Quality Standards to correct the unit
    deficiencies in a timely manner. This occurred because the
    Director of Housing Operations did not understand HUD’s
    Housing Quality Standards requirements. Seven of the
    eight units inspected by us were not decent, safe, and
    sanitary. The Executive Director allowed each inspector to
    do reinspections on each other. Having staff do quality
    control reviews on each other does not provide for
    complete objectivity and supervisory controls. The
    Executive Director should have immediately hired a
    qualified independent inspector to conduct quality control
    review inspections. The Executive Director and the Board
    of Commissioners should have assured that adequate
    training was provided to the Housing Authority’s
    inspectors.

•   Did not follow proper procurement practices because
    management had not assigned one specific upper level
    management official to be responsible for the practices.
    The Executive Director allowed different people to obtain
    the services of vendors at different times. The Executive
    Director should have assured that proper procurement
    practices were being followed and he should have assigned
    one management person the responsibility of ensuring the
    Authority conducted proper procurement practices.


           Page 5                               99-CH-202-1001
Finding 1


                 •     Used $95,558 of modernization grant funds in an inefficient
                       manner. Most of the inefficiencies occurred during the
                       tenure of a prior Executive Director because the Director
                       relied solely on the Authority’s Architect to oversee
                       modernization work.         A representative for the
                       Architectural firm said they were not responsible for
                       overseeing modernization work.

                 •     Incorrectly charged the total costs of physical and
                       management improvements to its Comprehensive Grant
                       Program instead of charging the costs to the benefiting
                       programs as required by HUD. The Authority’s Finance
                       Director who reviewed and approved the charges assumed
                       that the charges were correct.

                 •     Did not assure that its travel policy was comparable with
                       local practice. It also did not always follow its own travel
                       policy by not requiring supporting documentation for all
                       travel expenses paid to travelers and require the Board’s
                       prior approval of the travel. The Board of Commissioners
                       adopted the travel policy on October 15, 1996 during the
                       present Executive Director’s tenure. The previous policy
                       was in compliance with HUD regulations. The Board of
                       Commissioners should have thoroughly reviewed the new
                       travel policy to assure it was comparable to local public
                       practice before it was adopted. Both the Executive
                       Director and Board of Commissioners should have
                       required that all out of town travel received prior
                       authorization from the Executive Director and prior
                       approval from the Board as stated in the travel policy.

                 •     Did not have a proper cost allocation plan. The Authority
                       did not document the allocation of indirect payroll and
                       administrative costs to the various programs it operated.
                       The Director of Finance told us that the Authority used the
                       percentages in its operating budget to allocate costs. He
                       did not know how the budget estimates were developed
                       because the budget was prepared before he started
                       working at the Authority.

                 •     Did not maintain effective controls to safeguard its assets.
                       The Executive Director did not give adequate attention to
                       implementing effective procedures and controls.
                       Specifically, the Housing Authority did not: adequately
                       segregate the duties of its employees related to cash

99-CH-202-1001       Page 6
                                                                               Finding 1


                            receipts and disbursements; always review the biweekly
                            payroll time sheets; deposit rent receipts in a timely
                            manner; maintain effective controls over the Authority’s
                            supplies and materials; and properly safeguard computer
                            back-up discs.

                        The Board of Commissioners did not assure that the Authority
Frequent Turnover Of    had a continuous and stable management. Over the past five
Key Management          years, the Authority has had three Executive Directors and one
Personnel Contributed   interim Executive Director. The interim Director did not have
To the Problems         any experience in managing a housing authority. One of the
                        three Executive Directors had been a housing authority
                        Controller but did not have experience in the overall
                        management of a housing authority. The new directors usually
                        changed the management team, thus limiting knowledge of the
                        Authority’s goals and direction.

                        The Authority hired the current Executive Director in
                        September 1996. During the current Director’s tenure, there
                        have been three Maintenance Supervisors and three
                        Controllers. The frequent changes in top management caused
                        a lack of continuity in operations. The Authority did not
                        maintain an overall plan that outlined its direction, initiatives,
                        and planned actions for each functional area. As a result, the
                        Authority’s initiatives and priorities frequently changed and
                        employees lost enthusiasm for their jobs.

                        The Springfield Metropolitan Housing Authority did not have
Personnel Were Not
                        an adequate system to evaluate the performance of its
Effectively Evaluated
                        employees on a regular basis. The Authority evaluated its
                        employees in 1997 but did not evaluate them in 1996. The
                        evaluation system was not adequate because it used a universal
                        evaluation form for every position. For example, maintenance
                        personnel and accounting personnel were evaluated using the
                        same standards. The form did not evaluate the employees
                        against the performance standards contained in their respective
                        job descriptions. As a result, HUD and the Authority lacked
                        assurance that employees worked to expected standards, and
                        employees had less motivation to accomplish the tasks and
                        standards in their job descriptions.


                        Excerpts from the Executive Director’s comments on our
Auditee Comments        finding follow. Appendix B contains the complete text of the
                        comments.

                                   Page 7                                 99-CH-202-1001
Finding 1


                     In general, this finding is true, however, it fails to mention the
                     internal control changes already completed which are reported
                     in the responses to the findings. In addition, it does not
                     mention that the Executive Director provided a short written
                     report about the conditions at the Authority and later met with
                     and explained in more detail the problems. Many of the
                     problems reported to the Inspector General are found in their
                     findings. Finally, it did not distinguish between problems prior
                     to September 1996 and current problems.


                     The Executive Director said that in general the finding is true
 OIG Evaluation of   but he did not fully accept the responsibility for noncompliance
 Auditee Comments    with program requirements. The Executive Director noted that
                     we did not mention the internal control changes already
                     completed and reported in his responses to the individual
                     findings. The internal control deficiencies cited in the individual
                     findings existed at the time of our audit. Each of these findings
                     discuss the corrective actions taken or proposed to be taken by
                     the Executive Director. All the corrective actions were taken
                     or proposed during our audit or after we gave the findings to
                     the Executive Director.

                     At the start of our audit, the Executive Director provided us a
                     short written report about the conditions at the Authority. At
                     that time, the Executive Director had been at the Authority for
                     about 18 months which should have been sufficient time to
                     correct most of the problems cited in this report. Moreover, as
                     noted in the finding, we distinguished between the problems
                     that occurred during the present Executive Director’s tenure
                     and the problems that existed prior to his tenure. For example,
                     we noted that the ineligible and unsupported costs, excessive
                     vacancies, inadequate unit inspections, most of the improper
                     procurement practices, non-compliance with travel
                     requirements, improper allocation of indirect costs, and
                     inadequate controls for safeguarding assets occurred during
                     this Executive Director’s tenure. We also noted that the
                     inefficient use of modernization funds occurred during the prior
                     Executive Director’s tenure. Consequently, most of the
                     problems occurred during this Executive Director’s tenure.

                     The Inspector General did not note that the current Executive
 Auditee Comments    Director contracted with National Association of Housing
                     Redevelopment Officials to conduct a strategic plan for
                     Springfield Metropolitan Housing Authority, nor that the

99-CH-202-1001        Page 8
                                                                          Finding 1


                    process of this plan was impaired by non-action by the
                    Commissioners.        The Commissioners themselves have
                    discussed this as an issue to be revisited. If HUD can provide
                    technical training to the Authority for the development of a
                    strategic plan and provide oversight of its implementation, its
                    assistance will be appreciated.


                    We did not mention the contract with National Association of
OIG Evaluation of   Housing and Redevelopment Officials (NAHRO) in our finding
Auditee Comments    because the Executive Director never brought it to our
                    attention during the audit. The first time he mentioned it was in
                    his written response of September 11, 1998. We reviewed the
                    proposed contract and the proposal dated October 23, 1996.
                    According to the proposal, the National Association would
                    have prepared a strategic planning document for the Authority.
                    The proposal did not say what the document would contain.
                    Therefore, there was nothing for us to evaluate and we could
                    not determine whether it would have been adequate.


                    The employee evaluation system used by the Springfield
Auditee Comments    Metropolitan Housing Authority is adequate. The supervisors
                    are encouraged to add notes to the form provided which are
                    specific to the. job being evaluated. This gives the Springfield
                    Metropolitan Housing Authority consistency and individuality
                    in its evaluations.

                    In regard to the recommendations:

                    1. Technical assistance from HUD will be appreciated.

                    2. Assistance from HUD in developing a plan which will set
                       goals, direction, and initiatives will be appreciated. The
                       Springfield Metropolitan Housing Authority will implement
                       such a plan.

                    3. Performance evaluations are in place, as described above.

                    4. Significant improvement in implementing controls over
                       expenditures. See responses to previous Inspector General
                       findings.

                    Board of Commissioners - The Inspector General did not
                    provide detail as to what is needed for the Commissioners.

                               Page 9                                99-CH-202-1001
Finding 1


                     If HUD wishes to provide technical training for
                     Commissioners, it will be welcome.


                     The Executive Director indicated he disagreed with the
 OIG Evaluation of   recommendation regarding the development of a performance
 Auditee Comments    evaluation system. The Director indicated that the evaluation
                     system in use, using a universal evaluation form for every
                     position was adequate. As described in the finding, the
                     employees were not evaluated against the performance
                     standards contained in their respective job descriptions.
                     Consequently, there was no assurance that employees worked
                     to expected standards, and employees had less motivation to
                     accomplish the tasks and standards in their job descriptions.

                     Our recommendations address the need for HUD to provide
                     comprehensive training and technical assistance to the Board of
                     Commissioners regarding their duties and responsibilities.



 Recommendations     We recommend that HUD’s Director of the Public Housing
                     Hub in the Cleveland Office:

                     1A. Review and assess the audit findings in this report and
                         determine whether administrative action against the
                         Authority’s Executive Director is warranted. This
                         determination should be made no later than six months
                         from the date of this report.

                     1B. Take immediate administrative action against the
                         Board of Commissioners if they do not improve their
                         oversight of the Authority

                     1C. Provide comprehensive training and technical
                          assistance to the Authority's Executive Director and
                          the Board of Commissioners regarding their duties
                          and responsibilities.
                     We also recommend that HUD’s Director of the Public
                     Housing Hub in the Cleveland Office requires the Springfield
                     Metropolitan Housing Authority to:

                     1D. Develop an overall plan that includes the goals, direction,
                         initiatives, and tasks for the Authority and each of its
                         functional areas. The Director of Public Housing should
                         then use the plan to monitor the progress of the

99-CH-202-1001        Page 10
                                                 Finding 1


      Authority to improve its operations and to ensure its
      overall direction remains consistent.

1E.   Develop a performance evaluation system to be used to
      evaluate performance standards for each job category.




         Page 11                            99-CH-202-1001
                                                                                          Finding 2


       The Authority Paid $38,437 for Ineligible
              And Unsupported Costs
The Springfield Metropolitan Housing Authority disbursed $38,437 for ineligible and unsupported
expenses. Specifically, the Authority paid: (1) $25,690 to a nonexistent company for materials never
received; (2) $1,000 to the former Maintenance Director for an improper Boom rental; (3) $6,755 to
an elevator company for parts never received; (4) $2,692 to the former Maintenance Director for
unsupported costs; and (5) $2,300 for expenses not related to the Authority’s operations. The
Authority did not follow proper vendor payment procedures. As a result, the Authority apparently
misused its funds and consequently, had less funds available for its operations.


                                      Regulation 24 CFR Part 85.22(b) requires that State, local, and
 HUD Requirements                     Indian tribal governments follow the Office of Management
                                      and Budget Circular A-87, Cost Principles for State and Local
                                      Government. Part 85.3 defines a local government to include
                                      any public housing agency.

                                      Office of Management and Budget Circular A-87, Attachment
                                      A, Paragraph C(1)(a), requires that all costs be necessary and
                                      reasonable for proper and efficient performance and
                                      administration of Federal awards.

                                      The responsibility for managing the Housing Authority’s day-
 Executive Director’s                 to-day operations rests with the Executive Director. In
 Responsibilities                     particular, the Executive Director is responsible for hiring,
                                      training, and terminating Housing Authority staff; supervising
                                      cash management and bank reconciliation functions;
                                      monitoring operations for fraud and abuse; and maintaining the
                                      Authority’s overall compliance with Federal, State, and local
                                      laws.

                                      The Authority did not have written vendor payment
 The Authority Did Not                procedures. However, the Authority routinely follows the
 Have Written Vendor                  following procedures:
 Payment Procedures
                                      •   When materials and supplies are needed, a purchase
                                          requisition is issued and the materials and supplies are
                                          ordered.

                                      •   After the requisition is approved and signed by both the
                                          Maintenance Director and the Finance Director, a purchase
                                          order is issued. The Maintenance Department and Finance

                                               Page 13                               99-CH-202-1001
Finding 4


                                  Department maintains a copy of the purchase order and
                                  purchase requisition.

                            •     When the materials are received, the packing list and the
                                  materials are checked and verified against the purchase
                                  requisition and the purchase order. The packing list is then
                                  sent to the Finance Department.

                            •     When the invoice is received, the Finance Department
                                  checks the invoice against the requisition, the purchase
                                  order, and the packing list. The Finance Department then
                                  sends the whole package to the Maintenance Department
                                  for the Maintenance Director’s approval. After the
                                  Maintenance Director gives his approval, the Finance
                                  Department makes the payment to the vendor.

                            The Springfield Housing Authority did not follow proper
 The Authority Paid         vendor payment procedures when it paid $25,690 to Grunwald
 $25,690 To A nonexistent   Construction Supply Company for the purchase of roofing
 Company                    material. The payments were made by two checks written to
                            the Construction Company. One check for $18,794 was paid
                            on June 4, 1997 and another check for $6,896 was paid on
                            June 20, 1997. The Executive Director authorized the issuance
                            of the checks at the request of the former Maintenance
                            Director. The Executive Director did not have any assurance
                            that the Authority received the materials. In fact no materials
                            were received.

                            We could not determine whether the construction company
                            existed or not. The phone number and address listed on the
                            invoice belonged to a maintenance company. The owner of
                            this company told us that representatives from the Grunwald
                            Construction Supply Company rented space from their
                            building. He said the construction supply company was there
                            for about a week, paid cash for a month’s rent, and then left.
                            We determined that the checks were cashed by an individual
                            but were not deposited in any company’s or individual’s bank
                            account.

                            The misuse of the Authority’s funds occurred because the
                            Executive Director circumvented proper vendor payment
                            procedures. The Executive Director improperly approved the
                            requisition and the issuance of the checks at the request of the
                            former Maintenance Director. The Executive Director did not
                            require verification that the Authority actually received the

99-CH-202-1001                  Page 14
                                                                                Finding 3


                             materials before approving the issuance and signing of the
                             checks. The Director told us that he trusted the former
                             Maintenance Director.      Under proper vendor payment
                             procedures, the Maintenance Director and Finance Director
                             both approve and sign the purchase requisition. The Finance
                             Department is responsible for making a payment to a vendor,
                             once it makes the proper verifications that the ordered
                             materials have been received. Had the Executive Director
                             followed proper vendor payment procedures, this apparent
                             misuse of Housing Authority funds may not have occurred.

                             When the Housing Authority paid the $18,794 check, the
                             check and the purchase requisition were issued on the same
                             day, June 4, 1997. The purchase order was issued on June 6,
                             1997, two days after the check was issued. The bill of lading
                             showed that materials were ordered on May 24, 1997 before
                             the purchase requisition was issued. Nobody at the Authority
                             verified whether any materials were received. Under proper
                             procedures, the materials should be ordered after the issuance
                             of the purchase requisition and purchase order, and the check
                             should be issued after verification that the ordered materials
                             had been received.

                             When the Authority paid Grumwald Construction $6,896 on
                             June 20, 1997, there was no purchase requisition or purchase
                             order issued. No one at the Authority verified that the
                             materials were received before the check was paid.

                             The Authority inappropriately paid $1,000 to the former
                             Maintenance Director on June 4, 1997. The payment was for
The Authority
                             the reimbursement of a Boom Rental to set the roofing
Inappropriately Paid
                             materials on the roof. However, no roofing materials were
$1,000 To The Former
                             purchased, therefore no service was performed. The Executive
Maintenance Director .
                             Director authorized the issuance of the check to the former
                             Maintenance Director rather than the vendor. In addition,
                             there was no purchase requisition or purchase order issued for
                             the Boom Rental. The check was issued before the invoice
                             date of June 7, 1997. The invoice was handwritten and the
                             vendors name was not shown on it.

                             On July 16, 1997, the Authority paid $6,755 to an elevator
 The Authority Paid $6,755   company for elevator parts that were never received. The
 For Elevator Parts That     Executive Director approved the issuance and payment of the
 Were Not Received           check at the request of the former Maintenance Director.
                             However, the Executive Director did not require

                                       Page 15                              99-CH-202-1001
Finding 4


                             documentation that the Authority had actually received the
                             elevator parts before approving the payment. If the Authority
                             had verified the receipt of parts before approving the issuance
                             and payment of the check, this situation may not have
                             occurred.

                             The Executive Director approved payments of $2,692 to the
 The Authority Paid $2,692   former Maintenance Director for the purchase of maintenance
 For Unsupported Costs       equipment without verifying that the costs were proper and
                             reasonable. The maintenance equipment consisted of a water
                             blaster, pneumatic nail gun, chop saw, and a generator. The
                             former Maintenance Director purchased the equipment after
                             receiving the payments from the Housing Authority.

                             The water blaster and nail gun were apparently purchased by
                             the former Maintenance Director at an auction for $2,200.
                             However, the company shown on the invoice did not exist.
                             Therefore, we could not determine whether the costs were
                             appropriate.

                             The Authority reimbursed the former Maintenance Director
                             $280 for the purchase of a portable power generator and $212
                             for a chop saw, in April 1997. The former Maintenance
                             Director did not provide adequate documentation for the
                             purchase of the portable power generator or the chop saw.
                             There was no invoice for the generator. A handwritten note
                             indicated the model and serial numbers. The note did not show
                             the vendor name. A sticker on the chop saw indicated that it
                             was purchased from a hardware store.

                             The Authority paid $2,300 for unnecessary expenses including:
 The Authority Paid $2,300   $1,792 in administrative and interest expenses; $450 for the
 For Unnecessary Expenses    purchase of a general contractor’s license; and $58 for an
                             outing at a horse race track.

                             The Authority purchased and financed a trash compactor for
                             $18,510 in June 1997 and charged the cost to the
                             Comprehensive Grant program. The financing was for five
                             years at 11.5 percent. The Authority paid off the total amount
                             financed when the Executive Director realized that the interest
                             expense was ineligible and an unnecessary expense. By this
                             time, the Authority had already paid $1,792 in interest expense.

                             The Authority formed a not-for-profit corporation in order to
                             rehabilitate houses in HUD’s 203(k) Program. For this

99-CH-202-1001                Page 16
                                                                          Finding 3


                   corporation, the Authority paid $300 for a general contractor’s
                   license in 1997 and $150 for its renewal. The Executive
                   Director told us that the program was not fully operational, but
                   was in the planning stage. As these expenses were not for the
                   operations of the Authority, they were ineligible expenses.

                   The Authority also spent $58 for an office outing at a horse
                   racing track. This expense was not related to the operations of
                   the Housing Authority and therefore was not an eligible
                   expense.

                   We believe the apparent misuse of $36,137 of the Authority’s
                   funds were directly related to the Executive Director not
                   following proper vendor payment procedures. The Executive
                   Director followed a practice of authorizing the issuance of
                   checks without verifying that the Authority received the
                   materials and that the costs were proper. The misuse of the
                   remaining $2,300 was the result of the Director not realizing
                   that these were ineligible expenses. As a result, the Authority
                   had less funds to operate its public housing programs.


                   Excerpts from the Executive Director’s comments on our draft
Auditee Comments   finding follow. Appendix B contains the complete text of the
                   comments.

                   The Executive Director is the Chief Executive Officer of the
                   Public Housing Authority, and in this capacity is responsible for
                   everything. Good management principles clearly teach that the
                   Chief Executive Officer must delegate authority to those
                   persons who have proper credentials. The Directors of
                   Maintenance and Finance in place when most of the findings
                   happened were screened and found to have good credentials,
                   and the references expressed their good character. A system of
                   checks and balances was established between the two
                   departments in order to prevent fraud and theft.

                   The Executive Director denies circumventing the vendor
                   payment procedures outlined in the Inspector General’s
                   finding. He followed the procedures that were in place at the
                   time. The Executive Director should not need to review each
                   document that is part of procurement, and he should delegate
                   this detail to other staff. Specifically, the Finance Director did
                   not verify the documentation, and the Maintenance Director


                             Page 17                                 99-CH-202-1001
Finding 4


                 was dishonest and is under investigation for theft. The system
                 in place worked if the two department heads were functioning.

                 There was a serious breakdown in the normal processing of
                 invoices which was not reported to the Executive Director.
                 The Director of Finance was supposed to assure that all
                 documents relating to a purchase were in the file prior to
                 bringing the payment authorization or check approval to the
                 Executive Director. When the payment was issued, it was
                 assumed that all documentation was in order. In fact, there
                 were verbal communications from Finance that the
                 documentation was in the file.

                 One error in the Inspector General’s report is that the
                 Executive Director approved payment "at the request of the
                 Maintenance Director." He only approved payment of bills
                 recommended by the Finance Director. This was supposed to
                 be the check and balance in the system. Since the discovery of
                 this inadequacy steps have been taken to build better controls,
                 and the management staff is continuing to develop better
                 controls.

                 Because the problems with the elevators was deemed an
                 emergency, the Executive Director approved using All Pro to
                 service the elevators until proper bidding and procurement
                 could be completed. The Executive Director was not informed
                 until this finding was presented to him that $6,755.00 worth of
                 elevator parts had not been delivered. The documentation
                 should have been in the file if Finance brought the item for
                 payment approval.

                 The general contractor’s license was purchased as part of a
                 new program designed to provide Public Housing residents
                 with home ownership opportunities. The area most often
                 identified as the barrier to 203(k) was the lack of a general
                 contractor. The Springfield Metropolitan Housing Authority
                 has had opportunities to provide general contracting work on
                 potential 203(k) projects during this period, but none have ever
                 resulted in actual contracting work. The licenses were in
                 support of this program.

                 The $58.00 for a horse race outing was not known to the
                 Executive Director until this finding was produced.




99-CH-202-1001    Page 18
                                                                       Finding 3


                    The Executive Director acknowledged that as the Chief
OIG Evaluation of   Executive Officer, he is responsible for everything. He,
Auditee Comments    however, said following good management principles, he
                    delegated authority to the Directors of Maintenance and
                    Finance. The Director said in his response that he did not
                    approve the payment of any item unless the Finance
                    Department assured him that documentation was on file.

                    As noted in the finding, the Executive Director approved the
                    payments without any documentation from the Finance or
                    Maintenance Departments. Had the Director delegated the
                    authority and allowed the Maintenance and Finance
                    Departments to do their jobs, the apparent misuse of funds may
                    not have occurred. In fact the misuse of $36,137 out of
                    $38,437 was directly related to the Executive Director not
                    following proper vendor procedures or circumventing the
                    procedures. The remaining $2,300 was the result of the
                    Director not recognizing that these were ineligible expenses.

                    We found no evidence that any of the payments included in the
                    $36,137 were approved by the Finance Director as stated by
                    the Executive Director. Regarding the purchase of the elevator
                    parts for $6,755, the Authority’s files contained no
                    documentation that it was an emergency.



Recommendations     We recommend that HUD’s Director of the Public Housing
                    Hub in the Cleveland Office assures that the Springfield
                    Metropolitan Housing Authority:

                    2A.    Establishes written vendor payment procedures based
                           on the procedures that are routinely followed and
                           implements controls to insure that the procedures are
                           always followed.

                    2B.    Reimburses the Housing Authority $33,445 from non-
                           Federal funds, for inappropriate payments made for
                           which no materials and no services were received.

                    2C.    Reimburses the Housing Authority $2,300 from non-
                           Federal funds for payments of ineligible expenses.

                    2D.    Provides supporting documentation for the $2,692 paid
                           to the former Maintenance Director. If adequate
                           documentation cannot be provided, the Housing

                              Page 19                              99-CH-202-1001
Finding 4


                       Authority should reimburse the unsupported amounts
                       from non-Federal funds.




99-CH-202-1001   Page 20
                                                                                         Finding 4


               The Authority Has An Excessive
                  Number of Vacant Units
The Springfield Housing Authority had an excessive number of vacant units. Ninety three of its 889
available units or 10.5 percent were vacant despite a high demand for units. The Housing Authority
had 312 applicants on the waiting list. The excessive vacancy problem started in 1997 when the
Authority did not give priority to preparing vacant units for re-rental. There were long delays in
preparing a unit for rental and a lack of coordination between the Maintenance Department and the
Housing Operations Department. As a result, excessive vacancies caused the Authority to lose about
$121,000 in rental income in 1997. From January through May 1998, the monthly income loss
averaged about $16,700.


                                     Regulation 24 CFR Part 901 establishes the Public Housing
 HUD Requirements                    Management Assessment Program. The Program provides a
                                     system to measure the performance of public housing agencies
                                     using standard criteria. The Agency receives a score of "A"
                                     when the actual vacancy rate is less than three percent and a
                                     score of "F" or zero when the actual vacancy rate is greater
                                     than 10 percent. For unit turnaround times greater than 50
                                     days, the agency also receives a score of "F" or zero.

                                     Section (d) defines turnaround time as the annual average
                                     number of calendar days for vacant units to be prepared for re-
                                     rental and for a new lease to take effect.

                                     HUD Handbook 7460.7 REV-1, Field Office Monitoring of
                                     Public Housing Agencies, Paragraph 5-2 (c) requires an agency
                                     to complete unit turnaround on average of no more than 30
                                     days.

                                     The high vacancy rate at the Housing Authority became a
 Excessive Number Of
                                     problem during 1997. Although the Authority had 312
 Units Became Vacant
                                     applicants on its waiting list on May 31, 1998, 93 or 10.5
 During 1997
                                     percent of its 889 available units were vacant. Starting in
                                     January 1997, the Authority’s vacancy rate steadily increased
                                     from 5.5 percent to 15.4 percent in March, 1998. Since
                                     March, 1998, the vacancy rate has declined but was still
                                     excessive as of May 31, 1998. The following chart shows the
                                     trend:
Finding 4


                             16

                             14

                             12

                             10
                                                                                      Vacancy Rate
                              8
                                                                                      Acceptable
                              6

                              4

                              2

                               0
                              Jan. 97    Jul. 97   Jan. 98   May-98




                           As of May 31, 1998, 22 of the Authority’s 93 vacant units
                           were available for occupancy. The remaining 71 vacant units
                           were not repaired and thus not available for rental. Ninety five
                           percent of the vacant units (88 out of 93) were vacant for an
                           average of 142 days, ranging from 32 to 445 days. The
                           Authority’s units remained vacant for an excessive period of
                           time because the Authority took excessive time to repair the
                           units and re-lease them.

                           The Authority’s Public Housing Management Assessment
 Unit Turnaround Time
                           certification showed that its unit turnaround time increased
 Was Excessive
                           from 30 days in 1996 to 161 days in 1997. HUD’s
                           recommended turnaround time is 30 days. As a result of the
                           increase in turnaround time in 1997, the Authority’s vacancy
                           rate also increased steadily. We could not determine the
                           average time for the Maintenance Department to repair a unit
                           or the average time for the Housing Operations Department to
                           lease a unit. The Authority did not maintain this data for 1997,
                           as was required by HUD. For units vacated and re-leased
                           during 1998, the Authority was maintaining this data.

                           Between January and May 1998, the Authority leased 68 units.
                           These units were vacant for an average of 147 days. The
                           average time for the Maintenance Department to repair a unit
                           was 105 days and the average time for the Housing Operations
                           Department to lease a unit was an additional 42 days.

                           While the average time to repair a unit in 1998 was 105 days, it
 Units Were Not Repaired
                           took the Maintenance Department an average of only 11 days
 Timely
                           to actually perform the repair work on a unit once it was
                                                                               Finding 4


                        assigned to the maintenance crew. During 1997, the
                        Authority’s Maintenance Department did not give priority to
                        preparing vacant units for re-rental. In February 1997, the
                        Authority hired a Maintenance Director who did not assign all
                        the available maintenance employees to the maintenance
                        functions, including unit preparation. According to the
                        maintenance foreman, about five of the fifteen maintenance
                        workers were assigned to non- maintenance functions, such as,
                        renovating a building that the Authority had purchased. The
                        Authority terminated this Director’s employment in September
                        1997. Between September and December 1997, the Authority
                        did not have a Maintenance Director to supervise the
                        employees.

                        In December 1997, the Authority hired a Maintenance Director
                        who established the reduction in vacancies as a major priority.
                        This Director told us that his goal is to have an average
                        turnaround time of 21 days. To achieve this goal, he
                        established two crews for unit preparation and has assigned a
                        total of five men to the two crews. He also had two outside
                        contractors paint and clean the units. The Director told us that
                        he planned to hire two more maintenance men and reassign his
                        staff to form another unit preparation crew. The Director’s
                        prioritization has started showing some results and the vacancy
                        rate has started going down.

                        However, the Authority did not have a strategy for prioritizing
                        the repair workload. For example, units in better condition
                        could be completed first. The Authority assigned some units
                        for repairs that were recently vacated and some units that had
                        been vacant the longest. For the strategy to be fully effective,
                        the Maintenance Department needs to prioritize the repair
                        work load so that the units requiring minor repairs can be
                        repaired and released quickly after being vacated. For units
                        requiring extensive repairs, the Authority would need to
                        determine whether it is feasible for its staff to make the repairs
                        or to have an outside contractor do the work. The
                        Maintenance Department did not prepare any cost estimates
                        showing the required repairs and costs to help prioritize the
                        unit preparation workload.

                        Once the Maintenance Department prepared the units for re-
Units Were Not Leased   rental, it took an excessive time to re-lease them. The
Timely                  Authority’s Housing Operations Department took an average
                        of 42 days to re-lease the units in 1998. The excessive time
Finding 4


                    resulted because of a lack of coordination between the
                    Maintenance Department and the Housing Operations
                    Department.

                    The Authority did not have procedures that required the
                    Maintenance Department to notify the Operations Department
                    of the estimated repair completion dates for the vacant units. It
                    took the Operations Department three to 21 days to complete
                    the certification process for a potential new tenant. The
                    Operations Director told us that the Maintenance Department
                    started in April 1998, to verbally inform her Department about
                    the estimated dates after the maintenance crew starts the repair
                    work. Prior to April 1998, the Maintenance Department only
                    informed the Operations Department after the unit was
                    repaired. As a result, the Operations Department could not
                    anticipate the availability of units and begin the certification
                    process so that the units could be re-leased on a timely basis.


                    Excerpts from the Executive Director’s comments on our draft
 Auditee Comments   finding follow. Appendix B contains the complete text of the
                    comments.

                    This finding is accurate in the fact that there are excessive
                    vacancies and the process has not been adequately fine tuned.
                    It is in error in making assumptions based on the comments of
                    staff who are not in a position to know the entire situation, and
                    projecting the thoughts of the Auditors developed from this
                    input. The following summary will provide insight to the
                    problem and the steps taken to correct the problem.

                    The staff level of the Operations Department was insufficient to
                    handle the work required to process applications in a timely
                    manner. Additional staff was authorized in 1997, and the result
                    is fewer vacant units. This trend will continue providing the
                    Maintenance Department can prepare the units in a timely
                    fashion. With this in mind the following steps have been taken:

                    1. A sign in and sign off sheet has been used. When the
                       resident turns the key into operations, they sign and date a
                       form. When they turn the keys over to maintenance,
                       maintenance signs and dates the form. When maintenance
                       completes unit preparation and returns the keys, the form is
                       again signed and dated.
                                                                         Finding 4


                    2. Discussions with both Maintenance and Operations
                       Directors resulted in the Maintenance Department agreeing
                       to inform operations of units nearly ready to be turned over
                       to them. Operations then begins the process of screening
                       the next person on the waiting list.

                    3. The Maintenance Department evaluates each vacant unit,
                       and based on the needs of the unit assigns it to a make
                       ready team. In consultation with the Columbus HUD
                       office the oldest most damaged units are being cleaned
                       first. This is to help reduce the turn around time the Public
                       Housing Management Assessment Program measures.
                       Once those units are repaired, the other, less time
                       consuming units will be processed. Once Springfield
                       Metropolitan Housing Authority reaches this point the
                       Maintenance Department has stated they can keep up with
                       the move out rate

                    4. When the keys are turned over to maintenance a move-out
                       inspection is scheduled.     This inspection provides
                       information about the required repairs, and can provide
                       guidance about the potential costs. Based on this
                       information and information provided by operations a
                       decision will be made about scheduling the make ready
                       work..


                    The Executive Director accepted the facts in the finding.
OIG Evaluation of   However, the Executive Director took exception to the
Auditee Comments    statement in the finding attributed to the maintenance foreman.
                    The maintenance foreman told us that in 1997, five of the
                    fifteen maintenance workers were assigned to non-maintenance
                    functions, such as, renovating a building that the Authority had
                    purchased. The Director said in his response that it was an
                    error in making assumptions based on the foreman’s
                    comments. We did not make any assumptions. It is a fact that
                    the Authority did not hire any outside workers to renovate the
                    building and the renovation was done by the Authority’s
                    maintenance workers. As a result, maintenance workers were
                    assigned to non-maintenance functions.           The Executive
                    Director did not provide any explanation on how we were
                    wrong to accept the foreman’s statement.
Finding 4


                   In our opinion, the vacancy problem was due to long delays in
                   preparing a unit for occupancy by the Maintenance Department
                   and a lack of coordination between the Maintenance and
                   Housing Operations Departments. We do not believe that the
                   excessive vacancy problem was due to the lack of staffing in
                   the Operations Department as implied by the Executive
                   Director in his response. The Executive Director mentioned
                   some of the steps that the Authority has taken to correct some
                   of the problems cited in the finding. The Director, however,
                   did not address whether he is going to prepare a plan outlining
                   the strategy to reduce the unit preparation time.



 Recommendations   We recommend that HUD’s Director of the Public Housing
                   Hub in the Cleveland Office assures that the Springfield
                   Metropolitan Housing Authority:

                   3A.    Prepare a plan outlining the strategy to reduce the unit
                          preparation time. The plan should include: the required
                          repairs and estimated cost for each vacant unit; the
                          resources necessary to complete the repairs; a criteria
                          for determining whether the repairs should be
                          accomplished using Housing Authority staff or outside
                          contractors; a method of prioritizing units to be
                          prepared; and the target dates to complete the
                          preparation.

                   3B.    Establish and implement procedures to assure the
                          Maintenance Department estimates the completion date
                          for each vacant units and coordinates the information
                          with the Housing Operations Department.
                                                                                       Finding 4




                      Section 8 Unit Inspections
                         Were Not Adequate
The Springfield Housing Authority did not assure that its inspectors conducted adequate
inspections of the Section 8 units. Seven of the eight Section 8 units inspected by us and the
Authority’s fee inspector did not meet HUD’s Housing Quality Standards and contained 61
violations. The Authority’s inspectors had recently inspected and passed these units, within two
months of our inspections. Sixty of the 61 violations existed at the time of the Housing
Authority’s inspections. These deficiencies existed because of weak controls over the inspection
process. The Authority did not (1) carry out a quality control program to review the quality of
inspections done by its inspectors; (2) provide training to its inspectors; and (3) adequately
evaluate the annual performance of the inspectors. In addition, the Authority did not require the
owners to correct the deficiencies timely for units that failed to meet Housing Quality Standards.
As a result, Section 8 units were not decent, safe, and sanitary.


                                     HUD Regulations 24 CFR 882.108(a) and 982.1(a) require
 HUD Requirements                    that Section 8 dwelling units be decent, safe, and sanitary.
                                     Section 982.401(a) says that Section 8 housing must
                                     comply with the Housing Quality Standards to be decent,
                                     safe, and sanitary.

                                     Regulation 24 CFR 982.152(d) states in part that HUD may
                                     reduce or offset any Section 8 administrative fee to the
                                     Housing Authority, if the Authority fails to perform its
                                     administrative responsibilities adequately, such as not
                                     enforcing the Housing Quality Standards.

                                     HUD Handbook 7420.7, Public Housing Authority
                                     Administrative Practices Handbook, Chapter 5, paragraph
                                     5-12, states that housing authorities must establish
                                     procedures for reviewing a sample of completed Section 8
                                     unit inspections. A re-inspection by a supervisor of a
                                     random sample of five percent of the approved units is
                                     required.

                                     Paragraph 5-9 of the Handbook requires a Housing
                                     Authority to notify the owner immediately of the violations
                                     after the annual inspection reveals that the unit failed
                                     Housing Quality Standards. This notice must require that
                                     the violations be corrected within a specified time period
Finding 4


                            from 24 hours up to 30 days depending upon the
                            seriousness of the violations.

                            Page 38 of the Housing Authority’s Section 8
 Housing Authority’s        Administrative Plan dated January 17, 1995 requires that at
 Requirements               least five percent of the units inspected for the Section 8
                            Program will be re-inspected for Housing Quality Standards
                            in order to monitor each inspector.

                            The Housing Authority’s fee inspector and we inspected
 Inspected Units Were Not   eight selected Section 8 units during May and June 1998 to
 Decent, Safe, And          review the quality of inspections done by the Authority’s
 Sanitary                   two inspectors.      These units were inspected by the
                            Authority’s inspectors in April 1998 and were passed as
                            being decent, safe, and sanitary. In April 1998, the
                            Authority hired the fee inspector to monitor the quality of
                            inspections done by its inspectors by reinspecting the units.

                            Of the eight units inspected, seven units failed Housing
                            Quality Standards and contained health and safety
                            violations. The seven units had a total of 61 violations. The
                            Housing Authority’s fee inspector and we determined that
                            60 of the 61 violations existed at the time of the Authority’s
                            last inspection. The following table lists the violations by
                            category:

                                     Type of Condition          Number of Violations
                             Structures and Materials                   19
                             Space and Security                         11
                             Lead-Based Paint                             8
                             Illumination and Electricity                 8
                             Site and Neighborhood                        6
                             Sanitary Conditions                          5
                             Sanitary Facility                            2
                             Thermal Environment                          1
                             Interior Air Quality                         1
                                       Total                            61


                            We provided the Housing Authority’s Housing Operations
                            Director the inspection results and copies of the pictures
                            taken during the inspections.
                                                                                      Finding 4


                           HUD’s Housing Quality Standards require that Section 8
Structures and Materials   units be structurally sound and not pose any threat to the
                           health and safety of the tenants.

                           In the structures and materials category, we identified 19
                           violations in six units. These included floor board damage,
                           an exterior flue shaft not secured to the structure, a large
                           floor vent cover missing, a heat register not secured to the
                           floor, missing downspouts, basement steps in disrepair, a
                           front porch with a missing handrail, a ceiling severely
                           buckled, a front porch post not secured to the floor, ceiling
                           tiles ready to fall, and a large hole under a bathroom sink.
                           For example:

                           The living room ceiling of one unit was severely buckled
                           and no handrail existed for the front porch for another unit.
                           The basement steps were in serious disrepair for two other
                           units. These violations threatened the health and safety of
                           the occupants. The following pictures show the problems
                           with the ceiling, front porch, and basement steps.




                           Living room ceiling is severely buckled at 1834 Highland
Finding 4




            No handrail for front porch steps at 1311 Clifton




            Basement steps are in serious disrepair with no handrail at
            555 S. Limestone
                                                                                Finding 4


                     HUD’s Housing Quality Standards require that all windows
Space and Security
                     and doors that are accessible from the outside must be
                     lockable to reduce the risk of burglary or other unlawful
                     entry into the building. All bathrooms must allow for
                     privacy which includes a lockable door.

                     Six units had 11 violations related to space and security.
                     The violations included missing and non-functional locks on
                     windows and doors, and inoperable or missing smoke
                     detectors. The following picture shows that a back door
                     which was accessible from the outside was not lockable.




                     The back door was missing the half of the locking mechanism on the door
                     frame at 1834 Highland


                     HUD’s Housing Quality Standards states that lead-based
Lead-Based Paint     paint is a serious health hazard to small children in older
                     structures. All chewable protruding painted surfaces up to
                     five feet from the floor or ground, which are readily
                     accessible to children under seven years of age and have
                     cracking, chipping, peeling or loose surfaces may contain
                     harmful amounts of lead-based paint. All chewable surfaces
                     must be tested and if lead-based paint is found, all chewable
                     surfaces must be treated.

                     Six units had eight lead-based paint violations. The
                     violations included peeling paint: on a bedroom window sill
                     of a child’s room, on the dining room window frame, on the
                     exterior of a front living room window sill, and on exterior
Finding 4


                    siding and a front porch. The following picture illustrates
                    this violation.




                    t
                    Peeling paint on exterior siding and front porch at 1834 Highland


                    Four units had eight electrical violations. HUD’s Housing
 Illumination and   Quality Standards require that sufficient electrical sources
 Electricity        must be provided to permit the use of essential electrical
                    appliances while assuring safety. Fires and electrical shock
                    can result from inadequate or improperly installed electrical
                    facilities. The violations included loose and unsecured
                    overhead light fixtures, a broken receptacle in the bathroom,
                    a kitchen outlet missing a cover plate, overuse of extension
                    cords, and exposed wires in the bathroom above the sink.
                    These conditions were hazardous to the health, safety, and
                    welfare of the occupants. The following picture illustrates
                    the violation.
                                                                                           Finding 4




                           I
                            Improper wiring and exposed wiring for light fixture in bathroom above sink
                           at 1554 Sheridan, Apt. 2

                           The Authority’s fee inspector and we determined that 60 of
Most of the Violations     the 61 violations identified during our inspections existed at
Existed When The           the time of the Authority’s last inspection.              Our
Authority Last Inspected   determination was based on the information received from
The Units                  tenants and landlords in relation to the nature of the
                           violations and the short time elapsed between our
                           inspections and the inspections conducted by the
                           Authority’s inspectors. We conducted our inspections
                           within two months of the Authority’s inspections. All seven
                           units that failed our inspections were passed by the Housing
                           Authority’s inspectors.        The Authority’s Section 8
                           inspectors did not do proper and thorough inspections
                           because of weak controls over the inspection process.
                           Specifically: the Authority did not: (1) carry out a quality
                           control program by requiring a supervisor to reinspect a
                           sample of completed unit inspections in order to monitor its
                           inspectors; (2) provide training to its inspectors; (3)
                           adequately evaluate the annual performance of the
                           inspectors.

                           The Housing Authority’s Housing Operations Director told
A Sample of Completed      us that she had not conducted any quality control
Inspections Were Not       reinspections since 1996. She said she did not have time to
Reinspected By A           do the reinspections and knowing this, the Executive
Supervisor                 Director allowed each inspector to do reinspections on each
                           other. However, having staff do quality control reviews on
                           each other does not provide for complete objectivity and
                           supervisory controls. Independent reviews provide the
Finding 4


                            housing authority with information concerning the general
                            level of competence and consistency of the inspection staff.

                            The Authority started using an independent fee inspector to
                            do the reinspections in April 1998. In May and June 1998,
                            the fee inspector reinspected eleven units that had been
                            passed as meeting HUD’s Housing Quality Standards by the
                            Authority’s inspectors. We accompanied the inspector on
                            eight of the reinspections. The fee inspector determined
                            that seven of the eleven units he reinspected were
                            inadequate and the units should not have been passed. The
                            fee inspector left the Authority in July 1998. As of August
                            7, 1998, the Housing Authority had not assigned another
                            person to do the quality control reinspections.

                            The Housing Authority’s Section 8 inspectors did not
 The Inspectors Need        receive training in conducting the inspections. They told us
 Training                   that they needed training. The fee inspector hired to do
                            reinspections also did not have any Housing Quality
                            Standards training. All of his training involved city code
                            compliance violations which could be different from
                            Housing Quality Standards violations.

                            The Authority did not adequately evaluate the annual
 Performance Appraisals     performance of its inspectors. The performance appraisals
 were inadequate            were inadequate in identifying job performance problems.
                            The performance appraisal system was based on general
                            rating factors only, such as, neatness of the inspection
                            reports, quantity of work, attendance, judgment, and
                            adherence to policy. The Authority used the same rating
                            factors for all employees regardless of their position. The
                            system was not job specific and was not based on the job
                            description. The Authority did not rate the inspectors on
                            actual job performance, such as, quality of work done.

                            The Housing Authority did not require the owners of the
 The Authority Did Not      Section 8 units to correct the Housing Quality Standards
 Require The Owners To      deficiencies timely, 24 hours for serious and 30 days for
 Correct The Deficiencies   non-serious violations. The Authority’s inspection reports
 Timely                     also did not identify the serious violations. It improperly
                            allowed the owners until the end of the Section 8 lease to
                            correct violations.

                            We judgmentally selected six Section 8 units which failed
                            Housing Quality Standards at the time of the annual unit
                                                                        Finding 4


                   inspection in February 1998. The Authority failed 25 of the
                   88 units inspected in February 1998. In each of the six
                   cases, the Authority gave the owners until the end of the
                   Section 8 lease term to correct the violations. The lease
                   terms for all six units ended in May 1998. For example, the
                   unit at 335 W. Grand was inspected on February 12, 1998
                   and failed to meet the Housing Quality Standards. The
                   violations included a damaged wall and ceiling in the kitchen
                   and a non-working smoke detector. The Authority gave the
                   owner until May 31, 1998 (109 days) to correct the
                   violations. The lease term ended on May 31, 1998. The
                   inspection report also did not cite the non-working smoke
                   detector as a serious violation. The Authority should have
                   required the owner to correct this violation within 24 hours.

                   The Authority’s Director of Housing Operations did not
                   fully understand the HUD requirements and misinterpreted
                   them. She believed that the Housing Authority could give
                   the owner of the Section 8 units until the end of the lease to
                   correct violations. HUD requires the Section 8 units to
                   comply with the Housing Quality Standards throughout the
                   lease term and all violations corrected within a maximum of
                   30 days after the annual inspection reveals that a unit failed
                   to meet the Standards.


                   The Springfield Metropolitan Housing Authority recognizes
Auditee Comments   that Section 8 unit inspections are not meeting Housing Quality
                   Standards. Both Inspectors have been sent to professional
                   training on Housing Quality Standards and both are
                   experienced Inspectors. The missing element has been quality
                   control. To improve this, the Springfield Metropolitan
                   Housing Authority invited the HUD Construction Specialist, to
                   provide a Housing Quality Standards training update for the
                   Inspectors. We have involved other staff as a cross training
                   component. The training was held on August 24 to 26, 1998.

                   The Springfield Metropolitan Housing Authority is presently
                   searching for another contract Inspector.

                   The performance appraisal used by the Authority is generic in
                   that it measures a set of common evaluation characteristics.
                   There is room on the form for comments by the Supervisor to
                   address specific areas, and there always is the freedom to write
                   an addendum to the form. Using the form allows everyone’s
Finding 4


                     performance to be measured equally. If the Supervisor wishes
                     to add to the list of measurements they may do so.

                     The Section 8 Administrative Plan is under revision currently,
                     and the section on Housing Quality Standards will contain the
                     following language:

                     "Owners of Section 8 units are required to correct all Housing
                     Quality Standards violations within thirty (30) days and all
                     serious violations within twenty-four (24) hours; and its
                     inspectors will identify the serious violations in the inspection
                     reports."


                     The Executive Director agreed with all of our
 OIG Evaluation of   recommendations except for the recommendation regarding the
 Auditee Comments    performance appraisal system.         The Executive Director
                     indicated that the performance appraisal used by the Authority
                     was adequate. He also indicated that using a universal
                     evaluation form for every position was adequate so that
                     everybody’s performance could be measured equally. The
                     universal evaluation form would be perfect if all the employees
                     were performing the same duties, but every employee did not
                     perform the same duties. As described in the finding, the
                     employees were not evaluated against the performance
                     standards contained in their respective job descriptions. The
                     performance appraisals were inadequate in identifying job
                     performance problems. The system was not job specific and
                     was not based on the job description. The Authority did not
                     rate the inspectors on actual job performance, such as, quality
                     of work done.



 Recommendations     We recommend that HUD’s Director of the Public Housing
                     Hub in the Cleveland Office, requires the Springfield
                     Metropolitan Housing Authority to:

                     4A. Assure that all owners of Section 8 units which failed
                         the Housing Quality Standards inspections correct the
                         violations that existed at the time of the inspections.

                     4B. Assure that another supervisor or an independent
                         person replaces the fee inspector to conduct quality
                         control reinspections for a sample of completed unit
                         inspections.
                                                   Finding 4



4C. Assure that its inspectors and the fee inspector are
    provided adequate training.

4D. Revise its performance appraisal to be job specific
    based on the job description.

4E.   Establishes procedures and controls and include them
      in the Administrative Plan that would ensure that: (1)
      owners of Section 8 units are required to correct all
      Housing Quality Standards violations within 30 days
      and all serious violations within 24 hours; and (2) its
      inspectors identify the serious violations in the
      inspection reports.
                                                                                            Finding 5


           The Authority Did Not Follow Proper
                 Procurement Practices
The Springfield Metropolitan Housing Authority’s procurement practices did not comply with HUD’s
and its own requirements. Specifically, the Authority did not always: (1) allow full and open
competition; (2) follow proper procedures when there was an inadequate response to solicitations;
and (3) have written contracts. The problems occurred because the Authority did not have one specific
upper level management person responsible for the procurement process. Different people obtained
the services of vendors at different times. As a result, HUD lacks assurance that the Authority’s
procurement process was fair, equitable, and the Authority did not pay higher prices than needed.


                                      HUD Handbook 7460.8 REV-1, Paragraph 2-6, Procurement
 HUD Requirements
                                      Handbook for Public Housing Agencies and Indian Housing
                                      Authorities, requires a housing agency to conduct all
                                      procurements using full and open competition. An agency
                                      must allow all responsible sources to compete. Paragraph 4-26
                                      (E) states if a housing agency receives fewer than three
                                      proposals, the Agency should analyze the proposals and
                                      document the reason for the poor response. Depending on the
                                      results of the analysis, the Agency may either reject the
                                      proposals and issue a revised solicitation or proceed to evaluate
                                      the proposals.

                                      HUD Regulation 24 CFR 85.36 (b)(9) requires a housing
                                      agency to maintain sufficient records to show the significant
                                      history of a procurement. The records should include the
                                      rationale and justification for the method of procurement, the
                                      type of contract, the selection of the contractor, and the basis
                                      for the contract price.

                                      The Authority’s procurement policy says its objective is to
 Housing Authority’s
                                      provide fair and equitable treatment of all persons or firms
 Procurement Policy
                                      involved in the Authority’s procurement process; maximize the
                                      purchasing value of all funds expended by the Authority in
                                      satisfying its procurement needs; and provide safeguards for
                                      maintaining the general public’s confidence in the integrity of
                                      the Authority’s procurement program.

                                      The Authority’s policy requires that all procurement
                                      transactions be conducted in a manner that provides for full and
                                      open competition. For purchases under $25,000, the Authority
                                      can use small purchase procedures which requires the

                                               Page39                                  99-CH-202-1001
Finding 5


                           Authority to solicit quotations from a reasonable number of
                           sources (no less than three sources) to promote competition.
                           For purchases over $25,000, the Authority must advertise and
                           solicit at least three bids. The policy also requires that for
                           emergency procurements, a written determination of the basis
                           for the emergency and for the selection of a particular
                           contractor shall be included in the contract file.

                           We judgmentally selected 14 contracts awarded between 1995
 Fourteen Contracts Were
                           and 1997 for review. Eight of the contracts were for materials
 Reviewed
                           and repairs, and six were for services as follows:

                            Materials and Repairs                                 Cost

                           C & N Industrial                                   $ 601,000
                           Tri-State Renovations                                 466,381
                           Bruce Construction                                    150,438
                           Roger Storer Plumbing                                 239,755
                           B T Use, Inc.                                          78,231
                           All Pro Elevator                                       65,200
                           Grunwald Construction                                  25,690
                           Marathon Oil                                           18,510
                               Total                                          $1,645,205

                              Service Contracts                                   Cost

                           Environmental Plus                                   $ 30,120
                           Casterline Associates                                  48,214
                           Computer Free America                                  92,195
                           Data Directions                                        17,458
                           Cole, Acton, and Dunn                                 201,098
                           A & B Lawncare                                         31,235
                              Total                                             $420,320

                           For ten of the 14 contracts reviewed, the Authority did not
 The Authority did not     follow HUD’s and its own procurement requirements. In eight
 follow proper             of the ten cases, the Authority hired firms for the supply of
 procurement practices     materials and repairs, and for professional services without any
                           competition. For the remaining two cases, the Authority did
                           not follow proper procedures when there was an inadequate
                           response to solicitations. In addition, the Authority did not
                           have written contracts with three firms who provided their
                           services on an going basis. Two of the firms provided repair
                           services for boilers and elevators and one firm provided legal
                           services. The Authority did not have one specific upper level

99-CH-202-1001                  Page 40
                                                                                Finding 5


                           management person responsible for the procurement process.
                           Different people obtained the services of vendors at different
                           times.

                           The Authority awarded 8 of the 14 contracts we reviewed
Eight Firms Were Hired     without competition between 1995 through 1997. The
To Provide Materials and   Authority purchased materials and supplies from two firms,
Services Without Any       Marathon Oil and Grunwald Construction. Two firms (BT
Competition                USE, Inc. and All Pro Elevator) provided repair services on an
                           going basis. The remaining four firms (Cole, Acton and Dunn,
                           Data Directions, Casterline Associates, and A&B Lawncare)
                           provided other types of services. The following are examples of
                           the Authority’s non-compliance with the procurement
                           requirements:

                                               Materials and Supplies

                           The Authority purchased a trash compactor from Marathon Oil
                           for $18,510 in June, 1997. The Authority did not solicit
                           quotations from any other source. The Authority’s procedures
                           required solicitation of quotations from at least three sources.
                           A former Maintenance Director procured the trash compactor.
                           The Authority did not have documentation showing why
                           quotations were not solicited from other sources.

                                                       Repairs

                           During 1997 and 1998, the Authority paid All Pro Elevator
                           Company $65,200 to provide repairs to the elevators when
                           needed on an ongoing basis. The Authority did not solicit
                           competitive bids but procured the services using its purchase
                           order procedures. A former Maintenance Director hired this
                           firm without regard to the Authority’s procurement
                           procedures. The Authority did not have a written contract with
                           All Pro Elevator detailing the services, hourly labor charges
                           and any material charges. As a result, the Authority had no
                           way of knowing whether the amounts charged by All Pro were
                           reasonable. Starting in January, 1998, the Authority stopped
                           using All Pro Elevator for repairs. The Authority selected
                           Dover Elevator, Inc. to perform the repairs. The selection was
                           based on full and open competition and Dover was the lowest
                           bidder.




                                   Page41                                  99-CH-202-1001
Finding 5


                                                         Services

                             The law firm of Cole, Acton, Harmon, and Dunn has provided
                             legal services to the Authority since at least 1983. The
                             Authority did not have documentation to show how this firm
                             was hired or if open competitive procedures were ever used.
                             During 1995 through 1997, the Authority paid $201,098 to the
                             law firm for legal fees. The Authority did not have a written
                             contract with the law firm. A representative of the law firm
                             told us that to his knowledge, there has never been a contract
                             with the Authority. A written contract is required to, at the
                             very least, identify the cost and the scope of the services to be
                             provided by the law firm. As a result, HUD has no assurance
                             that the Authority obtained the lowest cost possible for the
                             legal services.

                             The Authority did not follow the procedures required by HUD
 Proper procedures were      Handbook 7460.8 REV-1, Paragraph 4-26(E) when there was
 not followed when there     inadequate response to solicitations. The Authority awarded
 was an inadequate           contracts to Roger Storer Plumbing and Environmental Plus
 response to solicitations   without following proper procedures. In both cases, the
                             Authority advertised and solicited bids. In each case, the
                             Authority received one bid and awarded the contracts to the
                             sole bidders. As required by HUD, the Authority did not:
                             document the possible reasons why only one firm submitted a
                             bid proposal; or justify why it was not necessary to re-bid. In
                             addition, the Authority did not prepare cost estimates before
                             soliciting bids to establish the reasonableness of the proposals.


                             Excerpts from the Executive Director’s comments on our draft
 Auditee Comments            finding follow. Appendix B contains the complete text of the
                             comments.

                             Several additional changes have been made to assure proper
                             competitive procurement. A new procurement policy was
                             written after the HUD model. One staff member has been
                             assigned the responsibility for oversight of all procurement.
                             This person has attended two professional training course on
                             procurement and was involved in the development of the new
                             policy. All procurement must now be cleared through this
                             person.

                             One of the major changes is to make the Finance Director
                             responsible for assuring that all purchases have proper

99-CH-202-1001                    Page 42
                                                     Finding 5


documentation of both receipts and that the amount was
proper. Goods must be signed off when delivered.

In response to the specific comments the following is offered:

Marathon Oil for $18,510.00 for the purchase of a trash
compactor: The Springfield Metropolitan Housing Authority
had a contract for refuse removal with the BFI company, which
later sold out to Waste Management. We were informed that
BFI would not provide service to a compactor they did not
provide, and we were contractually obligated to BFI. It was
apparent that BFI was the sole source provider for the
compactor. Marathon Oil was the subsidiary company BFI
used for compactor contracts.

All Pro Elevator for $65,200.00: All Pro Elevator was hired
on a temporary basis until proper procurement could take
place. Subsequent to this, both the Director of Finance and the
Director of Maintenance and Modernization left and there was
a longer period of time between the firing of the elevator
company and procurement of new services. Because of the
severe nature of the elevator problems it was necessary to
make several important and expensive decisions and certain
expensive work was approved during the interim.

Cole, Acton, Harmon and Dunn for $201,098.00: There has
never been a contract for these services, and there has never
been competitive solicitation of qualifications or proposals.
The procurement staff has been instructed to prepare a
solicitation of qualifications, and a competitive process, as
outlined in the Procurement Policy, will be processed. This will
be complete by the end of 1998.

Roger Storer Plumbing for $239,755.00: The Executive
Director noted this discrepancy in 1997, and required all future
solicitation for plumbing services follow the procurement
policy.

Grunwald Construction for $25,690.00: This may be a
fraudulent purchase which has been reported to the FBI for
investigation.

Casterline Associates for $48,214.00: In December, 1996, the
Comptroller for Springfield Metropolitan Housing Authority
was fired. We asked the Executive Director of the Dayton

        Page43                                  99-CH-202-1001
Finding 5


                 Housing Authority for assistance and they sent their finance
                 staff to Springfield to evaluate and decide what they may be
                 able to assist with. Their evaluation concluded that the finance
                 records were in such poor condition that they could not cope
                 with them. They then recommended Casterline Associates.
                 Understanding the severity of need, and the fact it was an
                 emergency to get the accounting functions improved, a
                 contract was agreed on.

                 Computer Free America for $92,195.00: There was a
                 committee consisting of staff from the various departments
                 who evaluated the proposals, and the selection was made on
                 the recommendation of the committee.

                 Data Directions for $17,458.00: Data Directions was the
                 computer software in place when the computer upgrade was
                 made. The choice was to upgrade the system or to change
                 computer software. When the cost of data conversion was
                 added to the cost of the software it became apparent that
                 continuing with Data Directions made the most sense. In
                 addition, the staff was very pleased with the Data Direction
                 software they had been using for years. Data Directions was
                 the sole source provider.

                 A & B Lawncare for $31,235.00: This was a contract
                 negotiated by the former Director of Maintenance and
                 Modernization which did not have competitive bidding.

                 In terms of the recommendations:

                 1. One person has been assigned the responsibility for all
                    procurement, and the Director’s of Finance and
                    Maintenance and Modernization both have check and
                    balance roles in procurement.

                 2. The contract for legal services will be advertised before the
                    end of 1998. Contracts for boiler repair services is now
                    being procured according to the approved policy.

                 3. All the recommendation in recommendation C have been
                    previously implemented.




99-CH-202-1001        Page 44
                                                                         Finding 5



                    The Executive Director accepted our recommendations and
OIG Evaluation of   has started the process of implementing them. When fully
Auditee Comments    implemented, they should resolve the problems cited in the
                    finding.

                    The Executive Director also provided his comments to each
                    instance of non-compliance with the procurement
                    requirements. None of the explanations given by the Executive
                    Director were documented in the procurement files or
                    anywhere else in the Housing Authority’s records.



Recommendations     We recommend that HUD’s Director of the Public Housing
                    Hub in the Cleveland Office requires the Springfield
                    Metropolitan Housing Authority to:

                    5A.    Assign one specific upper level management person, in
                           addition to the Executive Director, the responsibility of
                           ensuring the integrity of the procurement system. The
                           Authority’s procurement policy should also include a
                           statement that an upper level management person,
                           other than the Executive Director, be assigned the
                           responsibility for ensuring the integrity of the
                           procurement system.

                    5B.    Establish and implement procedures and controls to
                           follow HUD’s requirements and its Procurement
                           Policy. The procedures and controls should ensure
                           that: (1) written contracts are executed; (2) proper
                           procedures are followed when there is inadequate
                           response to solicitations; and (3) competitive bids are
                           solicited from at least three sources for all
                           procurements.




                            Page45                                  99-CH-202-1001
                                                                                                  Finding 6


        The Authority Used Modernization Grant
            Funds In An Inefficient Manner
The Springfield Metropolitan Housing Authority did not use its modernization (comprehensive) grant
funds in an efficient manner. Specifically, it did not (1) purchase the correct size of refrigerators for its
units resulting in the need for additional repair expenditures; (2) determine the cost reasonableness of
change orders; (3) ensure that it paid for only completed and necessary work; (4) adequately review
invoices; and (5) ensure all costs were eligible. The Authority placed too much reliance on it's
Architect to oversee the modernization work. As a result, the Authority incurred costs of $95,558 that
were unnecessary or unsupported.


                                         The Annual Contributions Contract requires the Housing
 HUD Requirements
                                         Authority to administer its developments to promote
                                         serviceability, efficiency, economy, and stability. The Housing
                                         Authority also certified in it's Comprehensive Grant Program
                                         applications that it would implement the modernization
                                         programs timely, efficiently, and in an economical manner.

                                         HUD Regulation 24 CFR 85.36(f)(1) required the Housing
                                         Authority to perform a cost or price analysis for every
                                         procurement action including contract modifications.

                                         In January 1995, the Authority replaced 100 refrigerators at
 The Authority Purchased                 the Hugh Taylor development that were larger than the
 Larger Refrigerators Than               space available.       The development originally had
 The Space Available.                    refrigerators with 11 cubic feet of space. The vendor
                                         determined that there was adequate space for refrigerators
                                         with 12 cubic feet of space. The vendor, however,
                                         recommended that the Authority purchase 13 cubic foot
                                         refrigerators because these were immediately available for
                                         delivery and the Authority could save $5,100 or $51 per
                                         refrigerator. The Authority purchased the 13 cubic foot
                                         refrigerators but the refrigerators did not fit in the space
                                         available for them. The refrigerator doors could not be
                                         opened fully and were blocked by auxiliary kitchen heaters.
                                         The Authority had to remove the heaters and replace them
                                         with new heaters. The new heaters cost the Authority
                                         $56,480. As a result, the Authority unnecessarily spent
                                         $51,380 ($56,480-$5,100).




                                                  Page47                                    99-CH-202-1001
Finding 6


                         Neither the Authority nor its Architect determined the cost
 The Authority Did Not   reasonableness of change orders, as required by HUD. The
 Determine The Cost      Authority issued 63 change orders for $421,221 for
 Reasonableness Of The   Comprehensive Grant Programs 701 to 704. A Housing
 Change Orders           Authority official told us that the Authority did not do any cost
                         or price analysis for reasonableness of the change orders
                         because they believed the Architect would have done it. A
                         representative of the Architectural firm said they did determine
                         the cost reasonableness for major change orders. He could not
                         provide documentation to support that a cost or price analysis
                         was done. However, it was not required by the Architects
                         contract that they make a determination of the cost
                         reasonableness. We judgmentally selected four change orders
                         and determined that the Authority paid excessive costs of
                         $39,444 as follows.

                         For three change orders issued in February and April 1995, the
                         Authority paid $219 each for the installation of 240 Americans
                         with Disabilities Act door knobs and 76 Schlage door handles.
                         It would cost a maximum of $75 each to purchase the kind of
                         door knob and door handle at a local hardware store and have
                         it installed by the Housing Authority. The Housing Authority’s
                         Maintenance Mechanic estimated that it would take a
                         contractor a maximum of 30 minutes to install each door knob
                         and door handle. The contractor charged a labor rate of $33
                         per hour. Allowing a 20 percent overhead charge on labor,
                         and a 10 percent profit, we determined that the Authority
                         should have paid a maximum of $105. As a result, the
                         Authority overpaid approximately $114 ($219 - $105) for each
                         door knob and door handle, for a total excessive amount of
                         $36,024.

                         For a change order issued in March 19, 1996, the Authority
                         paid $37 each for the installation of 171 shower rods. The kind
                         of shower rod installed by the Authority could be purchased
                         locally for a maximum of $7 per shower rod. The Authority’s
                         Maintenance Mechanic estimated that it would take a
                         maximum of 10 minutes to install each shower rod. Based on
                         the labor rate of $33 per hour, a 20 percent overhead charge on
                         labor, and a 10 percent profit, we determined that the
                         Authority should have paid a maximum of approximately $17
                         per shower rod. Consequently, the Authority overpaid $20 for
                         each shower rod, or $3,420 for all 171 shower rods.




99-CH-202-1001                Page 48
                                                                               Finding 6



                          The Housing Authority did not ensure that it only paid for
The Housing Authority     completed work and work that was necessary. A change
Did Not Ensure That All   order issued in November 1996 required the contractor to
Work Was Necessary        construct four concrete pads in order to place trash dumpsters
                          on them. The cost for each concrete pad was $1,200 each.
                          The contractor constructed only three pads but the Authority
                          paid for four. In addition, one of the three pads that was
                          constructed was not necessary, because a pad was already in
                          place at this site. The Authority assumed that the Architect had
                          assured that all work was done and all completed work was
                          necessary. A representative of the Architectural firm said he
                          was unaware that the concrete pad was not installed and an
                          inspection was not done to ensure that the pad was
                          constructed. As a result, the Authority unnecessarily spent
                          $2,400.

                          The Housing Authority unnecessarily replaced 24 kitchen
                          faucets for $1,200 at a development even though the faucets
                          had been previously replaced only two years earlier. The
                          Housing Authority staff told us that the only difference was
                          between the faucet handles. The old faucets had flat handles on
                          the end and the new faucets had rounded handles. The two
                          year old faucets were operating properly at the time of
                          replacement.

                          The Authority did not always review its invoices to ensure that
The Authority Did Not     they agreed with the purchase orders and were correct. As a
Always Review Its         result, the Authority overpaid an invoice for 20 refrigerators
Invoices                  by $400. The purchase order showed a price of $323 for each
                          refrigerator. The vendor billed $343 for each refrigerator and
                          the Authority paid this amount.

                          The Authority also overpaid it's Architectural firm $364 on one
                          of the invoices. The firm submitted an invoice of $1,404 for
                          reimbursement for work performed by a subcontractor. The
                          subcontractor’s invoice was attached and the subcontractor
                          had only charged $1,040. The Housing Authority did not
                          notice the difference until we brought it to their attention. It
                          appears that the Architectural firm made a transposition or
                          typing error on the invoice. Had the Housing Authority
                          reviewed the invoice carefully, it would have noticed the error.




                                  Page49                                  99-CH-202-1001
Finding 6


                           In 1997, the Housing Authority included a late fee of $370 in
 The Authority             its cost report submitted to HUD for the Comprehensive
 Erroneously Charged The   Grant. In February 1995, a vendor charged the Housing
 Comprehensive Grant       Authority the late fee because the Authority did not pay an
 Program A Late Fee        invoice by its due date. However, the Office of Management
                           and Budget Circular A-87, Attachment B, Section D,
                           Paragraph 7 says that fees like financing or late fees are not
                           eligible costs. The Authority's employee who prepared the cost
                           report did not know that this was an ineligible cost and could
                           not be charged to the Comprehensive Grant.

                           Because the Authority did not maintain proper controls over
                           expenditures of modernization funds, it: (1) unnecessarily spent
                           $51,380 for new auxiliary kitchen heaters when it installed
                           oversized refrigerators; (2) overpaid $39,524 for change
                           orders; (3) paid $1,200 for a concrete pad that was not
                           installed and $1,200 for another concrete pad that was not
                           necessary; (4) paid $1,200 for kitchen faucets that did not need
                           to be replaced; (5) overpaid an invoice for refrigerators by
                           $400 and an Architectural firm’s invoice by $364; and (6) paid
                           an ineligible late fee of $370.


                           Excerpts from the Executive Director’s comments on our draft
 Auditee Comments          finding follow. Appendix B contains the complete text of the
                           comments.

                           Prior to the hiring of the present Executive Director, the
                           Comprehensive Grant Program was not operated in a business
                           like manner. Except for the recommendation noted below, the
                           finding is accurate. Once the problems were discovered, steps
                           were taken to begin correcting the problems, and tightening up
                           the management of the Comprehensive Grant Program.

                           A few of the measures taken to restructure the program are:

                              1. The position of Comprehensive Grant Program
                                 Coordinator is now under the supervision of the
                                 Director of Maintenance and Modernization. Formerly
                                 it reported directly to the Executive Director but in
                                 reality was left unsupervised.

                              2. The Finance Department has been given direction that
                                 no funds are to be drawn down from HUD before all
                                 the supporting documentation is in the file.

99-CH-202-1001                  Page 50
                                                Finding 6



3. The Finance Department has set up a process for
   drawing down funds soon after the debt is
   documented. This prevents the Comprehensive Grant
   Program from using public housing to cover costs.

4. Internal controls have been established to prevent
   further occurrences of the problems.

       a. The Comprehensive Grant Program process
          will follow the resource manual.

       b. All entities who will be impacted are involved
          in the planning and will sign off on the plan
          through their elected resident councils before it
          is submitted.

       c. Management staff will facilitate the assessment
          of all relevant information.

       d. The management team will evaluate the
          pertinent data and establish a priority of needs.

       e. Work items will be ranked based on urgency of
          need regardless of the development in which
          they are located.

       f. Management will provide adequate resources
          for administration, audit, design, and
          inspection, as well as overall management for
          the program.

       g. Comprehensive Grant Program work will be
          monitored to assure that the work is
          progressing efficiently and effectively.

       h. Federal funds will be managed properly and not
          used for fraudulent purposes.

       i.    All work items will be conducted in accordance
             with the Comprehensive Grant Program rules,
             the annual statement and the five year action
             plan.




    Page51                                  99-CH-202-1001
Finding 6


                                 j.   The Authority’s procurement policy will be
                                      followed on all procurement activities.

                                 k. A new procurement policy was adopted on
                                    January 20, 1998, and it is in accordance with
                                    the latest HUD guidelines.

                     The recommendation that "The Authority should reimburse the
                     Grant any costs that cannot be supported to be reasonable and
                     necessary, or are ineligible." Considering the status of the
                     Authority’s financial condition, it is unlikely the Authority has
                     the necessary resources available to repay these errors. Steps
                     have been taken to correct the problems and future
                     Comprehensive Grant funds will be used properly. It is
                     suggested that HUD not require repayment of the funds.


                     The Authority has planned actions that should correct some
 OIG Evaluation of   problems identified in the finding if the actions are fully
 Auditee Comments    implemented and become routine procedures. The Authority
                     still needs to establish procedures for performing cost and price
                     analysis for all procurement actions including change orders.

                     In our opinion, in order to establish proper accountability for its
                     actions, the Housing Authority needs to reimburse all ineligible,
                     unnecessary and unreasonable costs from non-Federal funds.
                     One potential source for repaying the funds is the fee the
                     Authority receives for administering its Section 8 Program.



 Recommendations     We recommend that HUD’s Director of the Public Housing
                     Hub in the Cleveland Office requires the Housing Authority
                     to:

                     6A.     Reimburse the Comprehensive Grant Program $1,970
                             for ineligible costs that include: (1) $1,200 for a
                             concrete pad that was not installed; (2) an overpayment
                             of $400 for refrigerators; and (3) an ineligible late fee
                             of $370.

                     6B.     Provide documentation that the costs of $93,588 were
                             necessary and reasonable. The costs include: (1)
                             $51,380 for the installation of new auxiliary kitchen
                             heaters when it installed oversized refrigerators; (2)
                             overpayment of $39,444 for change orders; (3) $1,200

99-CH-202-1001             Page 52
                                                    Finding 6


      for a concrete pad that was not necessary; (4) $1,200
      for kitchen faucets that did not need to be replaced; and
      (5) a payment of $364 to the Architectural firm. The
      Authority should reimburse the Grant any costs that
      cannot be supported to be reasonable and necessary, or
      are ineligible.

6C.   Establish procedures and controls to ensure that the
      modernization funds are spent in an effective and
      efficient manner. The procedures should include:
      performing cost and price analysis for all procurement
      actions including change orders, inspections, and
      documentation of all the completed work before
      making payments, and conduct reviews of invoices for
      correctness and eligibility of costs.




      Page53                                   99-CH-202-1001
                                                                                         Finding 7


        The Authority Incorrectly Charged Costs
         to the Comprehensive Grant Program
The Springfield Housing Authority incorrectly charged the Comprehensive Grant Program for the total
costs of improvements to its computer and telephone system instead of charging the costs to the
benefiting programs, as required by HUD. The improvements benefited both the Public Housing and
Section 8 Programs. The current Finance Director assumed the charges were correct because the
Authority had always charged the Comprehensive Grant Program for the full cost of the
improvements. As a result, the comprehensive grant costs were not accurately documented.


                                      HUD Regulations 968.112 (n)(3) states that where the physical
 HUD Regulations
                                      or management improvement costs benefit programs other than
                                      public housing, such as the Section 8 programs, eligible
                                      comprehensive grant costs are limited to the amount directly
                                      attributable to the Public Housing Program.

                                      The Springfield Housing Authority charged the total cost of
   The Housing Authority              $124,570 for the improvement of its computer and telephone
   did not charge the Section         systems to the Comprehensive Grant Program. The systems
   8 Program its fair share           benefited both the Public Housing and the Section 8 Programs
                                      but all costs were charged to the Comprehensive Grant
                                      Program. In May 1997, the Authority purchased computer
                                      hardware for $92,000 and software for $17,457. In January
                                      1998, the Authority paid $15,113 for a new telephone system.
                                      No costs were charged to the Section 8 Program.

                                      An acceptable method of charging the costs to the benefiting
                                      programs would be to base the allocation of costs on the
                                      number of units. The Housing Authority has 892 public
                                      housing units and 1000 Section 8 units. Based on the number
                                      of units, the comprehensive grant should have been only
                                      charged 47.15 percent of the total costs, or $58,734. The
                                      remaining 52.85 percent, or $65,836, should have been
                                      charged to the Section 8 Program.

                                      A Housing Authority employee told us that physical and
                                      administrative improvements costs were charged to the
                                      comprehensive grant because the Authority had always
                                      charged these costs to the grant. The Finance Director who
                                      reviewed and approved the charges assumed that the charges
                                      were correct.


                                              Page55                                99-CH-202-1001
Finding 7



                    Excerpts from the Executive Director’s comments on our draft
 Auditee Comments   finding follow. Appendix B contains the complete text of the
                    comments.

                    The Inspector General appears to be approaching the
                    Springfield Metropolitan Housing Authority as a federation of
                    all its programs, not as an entity made up of all its programs.
                    During the Congressional debate concerning the
                    Comprehensive Modernization Program, the issue of
                    addressing the needs of the whole Public Housing Authority
                    was discussed. In HUD "Comprehensive Grant Program
                    Guidebook October 1996," page 4-12, item 4-9 it states "As
                    part of the Comprehensive Plan, the Housing Authority shall
                    prepare Form HUD-52833, Management Needs Assessment,
                    identifying all improvements (including those with no cost)
                    needed to upgrade the management and operation of the
                    Housing Authority.

                    The basic components of the computer system (hardware and
                    software) were necessary to support the Public Housing
                    Program, and would have been purchased if only the Public
                    Housing Program were served. In order to address the
                    accounting functions, it was necessary to have software that
                    interfaced with all programs, including Section 8. The attached
                    charts demonstrate the actual additional cost of adding Section
                    8 to the computer system. All ongoing expenses for operating
                    the system are being shared by the Section 8 Program.

                    The same basic premise will hold for the telephone system
                    purchase. In order to upgrade Public Housing, it was
                    necessary to upgrade all phones. The basic items would have
                    been purchased even if the Section 8 Program had not been
                    included. The actual additional costs for the Section 8
                    telephones is included in the attached charts.

                    The most critical issue if the Springfield Metropolitan Housing
                    Authority will be required to pay Public Housing from Section
                    8 funds, is the issue of how a proration of costs will be defined.
                    The Inspector General has used the unit count for deciding the
                    Authority owes HUD $65,836. The Authority wants to use
                    the actual additional costs incurred for expanding the systems
                    to the Section 8 Department. Using this method the
                    adjustment from Section 8 is $23,247.


99-CH-202-1001            Page 56
                                                                       Finding 7


                    The Springfield Metropolitan Housing Authority requests that
                    the adjustments from Section 8 be waived due to the lack of
                    funds in the Section 8 accounts. The attached memo makes
                    clear that future charges to the Comprehensive Grant Program
                    will be properly prorated.


                    The Housing Authority did not charge the costs to each
OIG Evaluation of   benefiting program as required by HUD regulations. It
Auditee Comments    charged the total costs to the Public Housing Program
                    although the Section 8 Program also benefited from these
                    costs. It is necessary that the accounting records for each
                    program are accurate and the costs are accurately documented.

                    The Housing Authority wants to prorate the costs based on
                    the actual additional costs incurred for expanding the systems
                    to the Section 8 Program. The method suggested by the
                    Housing Authority is acceptable provided it can accurately
                    document the amount of additional costs incurred. HUD
                    would have to verify the data provided by the Authority with
                    its response and determine the actual amount that should be
                    charged to the Section 8 Program.



Recommendations     We recommend that HUD’s Director of the Public Housing
                    Hub in the Cleveland Office, requires the Springfield
                    Metropolitan Housing Authority to:

                    7A.    Establish procedures to ensure that costs charged to
                           the comprehensive grant are limited to the amount
                           directly attributable to the Public Housing Program.

                    7B.    Reimburse the Comprehensive Grant Program for the
                           cost of the computer and telephone system that did not
                           benefit the Public Housing Program.




                            Page57                                 99-CH-202-1001
                                                                                              Finding 8


                   The Authority Did Not Follow
                       Travel Requirements
The Springfield Housing Authority did not assure that its travel policy was comparable with local
practice, as required by the Annual Contributions Contract. In addition, the Authority did not always
follow its own travel policy. Specifically, the Authority did not always: (1) obtain Board approval prior
to authorizing the travel; and (2) have supporting documentation for all travel advances paid to the
travelers. The Executive Director did not know that the travel policy had to conform to local practice.
As a result, the Authority’s travel policy was not cost efficient and economical. In addition, HUD has
no assurance that its travel costs were necessary and reasonable.


                                        Section 307(A) of the Annual Contributions Contract
 Annual Contributions
                                        requires the local authority to adopt and comply with a
 Contract
                                        statement of personnel policies comparable with pertinent
                                        local public practice. Such statement must include the
                                        payment of expenses of employees in travel status. In
                                        addition, Section 307(C) requires the local authority to
                                        maintain complete records with respect to employees’
                                        official travel and vouchers supporting reimbursement of
                                        travel expense.

                                        The Housing Authority’s travel policy states that: (1) all out
 The Housing Authority’s                of-town travel requiring an overnight stay shall have prior
 Travel Policy                          authorization by the Executive Director and be approved by
                                        Board Resolution; and (2) the Authority may advance per
                                        diem funds to a Board Member or employee who will
                                        submit the travel expense report within seven days of return
                                        from the approved travel. All non per-diem costs must be
                                        verified by receipts in order to be reimbursed.

                                        The Housing Authority’s policy was not comparable to
 The Authority’s travel
                                        local public practice. The Authority adopted its present
 policy was not comparable
                                        travel policy in October 1996. The Springfield Housing
 to local public practice
                                        Authority is located in Clark County. The primary
                                        difference between the Authority’s travel policy and Clark
                                        County’s travel policy was the daily per diem allowance.
                                        The Authority’s policy allowed up to $100 per day for
                                        meals, taxi fares and other costs. The Clark County’s travel
                                        policy allowed a daily allowance for meals of $30 a day.
                                        The allowance could be higher for high cost cities, but must
                                        be approved on a case by case basis.


                                                 Page59                                  99-CH-202-1001
Finding 8


                         The Executive Director told us that he did not know the
                         policy had to conform to local practice. He said he revised
                         the travel policy in 1996 because the per diem rates were
                         too low for the high cost cities. The $100 per day
                         allowance for meals is excessive compared to the $30
                         allowed for meals by Clark County.           The Housing
                         Authority’s previous travel policy was comparable to the
                         local policy. That policy was prepared in 1993 based on a
                         recommendation from our audit of the Authority.

                         For example, one Board Member’s travel voucher showed a
                         charge of $74 for dinner. The receipt attached to the travel
                         voucher showed that the Member paid for at least two
                         dinners. Further, the Executive Director attended a five day
                         conference in New York in July 1997. Not including the
                         first and last days of travel, which were partial days, the
                         Executive Director spent an average of $77 a day for meals,
                         compared to the $30 a day allowed by local public practice.

                         The Authority did not fully comply with its own travel
 The Authority did not   policy. Specifically, it did not always: (1) obtain Board
 follow its own travel   approval prior to authorizing the travel; and (2) have
 policy                  supporting documentation for all travel expenses paid to the
                         travelers.

                         Board approval was not always obtained

                         During 1997, there were three instances of travel by
                         employees or Board Members that were not approved by
                         the Board prior to travel.

                         The Executive Director approved the travel of the former
                         Maintenance Director twice without obtaining prior
                         approval from the Board. The first instance was for travel
                         from May 7 through May 9, 1997 to Louisville, Kentucky
                         and Nashville, Tennessee. The Board, however, approved
                         this travel on May 20, 1997, or about two weeks after the
                         former Maintenance Director returned from the trip. In the
                         second instance, the former Maintenance Director attended
                         a conference in Indianapolis, Indiana from June 11 to June
                         14, 1997 that the Board never approved.

                         Finally, the Executive Director and a Board Member
                         traveled to Washington DC to attend a conference between
                         January 10 and 12, 1998. The Board approved this travel

99-CH-202-1001                Page 60
                                                                      Finding 8


                   on January 20, 1998, eight days after completion of the
                   travel. The Executive Director said that in his opinion, the
                   travel policy did not require Board approval prior to going
                   on travel status. As a result, he did not always submit his
                   travel authorization to the Board prior to the business trip.
                   We believe the policy is very clear and requires prior Board
                   approval.

                   Lack of supporting documentation for travel advances

                   The Authority did not maintain documentation, such as
                   invoices, to support the settlement of travel advances paid
                   to its employees or Board Members. The Authority had
                   paid $3,999 in travel advances that were not settled. A
                   Board Member was paid $2,750 in travel advances: $1,000
                   on June 3, 1993; $750 on March 10, 1994; and $1,000 on
                   March 13, 1996. However, the Board Member did not
                   submit any travel expense reports or invoices to support the
                   travel advances. The Authority also advanced the former
                   Maintenance Director a total of $1,500 for four trips he
                   made during 1997. However, the former Maintenance
                   Director submitted travel expense reports for these trips
                   amounting to only $251. He did not pay back or provide
                   supporting documentation for the remaining $1,249.
                   Therefore, the Former Maintenance Director still owed the
                   Authority $1,249.

                   The former Maintenance Director also submitted mileage
                   expense reports totaling $1,312. However, he did not
                   provide the Housing Authority adequate documentation to
                   support the specific sites that he traveled to and the nature
                   of Authority the business that he performed.


                   Excerpts from the Executive Director’s comments on our draft
Auditee Comments   finding follow. Appendix B contains the complete text of the
                   comments.

                   The proposed language in the draft personnel policy is as
                   follows:

                   1. Meals will be reimbursed up to a maximum per diem
                      without receipts as specified in the Federal Register for
                      other than Federal civilian employees.


                           Page61                                99-CH-202-1001
Finding 8


                     2. The traveler will endeavor to pay no more than the
                        maximum Federal lodging amount based upon the rates
                        published in the current applicable Federal Register. The
                        maximum Federal lodging amount included taxes.

                     3. When traveling to a "high cost" location, the traveler may
                        choose to be paid for those costs exceeding the per diem
                        allowance by providing receipts and other documentation
                        to justify the actual expenses."

                     Recent changes in the processing of travel vouchers will
                     provide more checks and balances. Now the Director of
                     Finance must review and sign off on all travel vouchers. Then
                     the voucher will be presented to the Executive Director for
                     approval. It will then be returned to another person in finance
                     for processing and filing. Each step of this process should
                     require review of the documentation supporting the travel.

                     In regard to the specific amounts recommended be paid from
                     non-HUD funds, the following is accurate information from the
                     accounts:

                     All of the travel amount $2,750.00 reported to be owed by the
                     commissioner is in error. The records show that an adjustment
                     to the accounts was made during July and September, 1996.
                     There are no balances owed in the accounts.

                     The former Maintenance Director did submit travel vouchers
                     for the use of his own vehicle. All the vouchers are in the file,
                     and most have data which identifies why he was traveling. He
                     did not fill the information in on the lines identified for this
                     information, and in some cases he lumped things together. At
                     the time his employment was terminated, this was one of the
                     issues management was trying to correct.

                     Finally, the out of town travel by the former Maintenance
                     Director is generally correct. However, the amount shown in
                     the report differs from the Housing Authority Accounting
                     records. They show he owes $1,149.00. Since the former
                     Maintenance Director is no longer an employee of the Housing
                     Authority it will be very difficult to recover this amount.


                     The Executive Director proposed to use the federal guidelines
 OIG Evaluation of   for reimbursement of meals and lodging. We believe these
 Auditee Comments
99-CH-202-1001            Page 62
                                                                     Finding 8


                  guidelines are comparable to Clark County’s practices for
                  travel. The proposed new procedures and controls if
                  implemented will address the recommendations regarding
                  establishing procedures and controls.

                  The Executive Director stated in his response that the $2,750
                  reported to be owed by a Board Member was in error. He said
                  that the Authority’s accounting records were adjusted in July
                  and September 1996 to show the Board Member did not owe
                  anything. As stated in the finding, the Board Member did not
                  submit any documentation, such as, travel expense reports or
                  invoices to support travel advances of $2,750. The Executive
                  Director also did not provide any documentation to support the
                  travel advances and the basis for the adjustments to the
                  Authority’s accounting records. If the Board Member cannot
                  provide documentation, such as invoices to support the
                  expenditure of travel advances, then the member will owe the
                  unsupported amount.

                  The former Maintenance Director’s expense reports did not
                  have adequate documentation showing the specific sites that he
                  traveled to and the nature of the business.

                  The Executive Director said in his response that according
                  to the accounting records, the former Maintenance Director
                  owed $1,149 instead of $1,249, as shown in the finding.
                  According to he Authority’s records, the Authority
                  advanced the former Maintenance Director a total of $1,500
                  and the Director submitted travel expense reports for only
                  $251. Therefore, based on the documentation we reviewed
                  he still owed $1,249($1,500-$251).



Recommendations   We recommend that HUD’s Director of Public Housing Hub in
                  the Cleveland Office assures that the Springfield Metropolitan
                  Housing Authority:

                  8A     Revises its travel policy so that it is comparable with
                         local public practice.

                  8B.    Establishes and implements procedures and controls
                         which will assure compliance with the Authority’s
                         travel policy.



                          Page63                                 99-CH-202-1001
Finding 8


                 8C.     Provides supporting documentation for the $3,999 in
                         unsupported travel costs and $1,312 in mileage costs
                         for the Board Member and former Maintenance
                         Director, or reimburses HUD from non-federal funds
                         for the amounts that cannot be substantiated.




99-CH-202-1001         Page 64
                                                                                             Finding 9


            The Authority Could Not Support Its
                Allocation of Indirect Costs
The Springfield Housing Authority did not have documentation to support the allocation of indirect
payroll and administrative costs to the various programs it operated. It allocated the indirect costs
based on unsupported budget estimates and past practice. As a result, neither the Housing Authority
nor HUD had assurance that costs charged to the Authority’s various programs were reasonable or
appropriate in relation to the benefits they derived from the indirect costs.


                                      HUD Regulation 24 CFR, Section 85.22(b) requires State,
 HUD Requirements                     Local, and Indian Tribal Governments to comply with Office of
                                      Management and Budget Circular A-87, Cost Principles for
                                      State and Local Government. Section 85.3 defines a local
                                      government to include any public housing agency.

                                      Attachment B, Paragraph 11(h) of the Circular states that
                                      where employees work on multiple activities (programs) or
                                      cost objectives, a distribution of their salaries or wages will be
                                      supported by personal activity reports or equivalent
                                      documentation. These reports or documentation must: reflect
                                      an after-the fact distribution of the actual activity for each
                                      employee; be prepared at least monthly and signed by each
                                      employee. Budget estimates or other distribution percentages
                                      determined before the services are performed do not qualify as
                                      support.

                                      Attachment C of the Circular requires the Authority to develop
                                      and carry out a plan to support the allocation of any indirect
                                      administrative costs to benefited programs on a reasonable and
                                      consistent basis. All costs and other data used to distribute the
                                      costs included in the plan should be supported by formal
                                      accounting and other records that support the propriety of the
                                      costs assigned to Federal awards.

                                      The Springfield Housing Authority did not maintain any
 Allocation of Salaries and
                                      documentation, such as time distribution records, to support
 Wagers Were Not
                                      the allocation of salaries and wages costs to its various
 Supported
                                      programs. For 1997, the Authority allocated the salaries and
                                      wages for eleven employees to three programs, Low-Income
                                      Housing, Section 8 Housing and Comprehensive Grant
                                      Programs. The Authority did not allocate any salaries to the
                                      Drug Elimination Grant, Family Self Sufficiency, North Hill

                                               Page65                                   99-CH-202-1001
Finding 9


                          Apartments, Tenant Based Assistance, and Shelter Plus
                          Care. The Director of Finance told us that the Authority
                          used the percentages in its operating budget to allocate the
                          salaries and wages to the various programs. The Director
                          of Finance did not know how the budget estimates were
                          developed because the budget was prepared before he
                          started working at the Authority in December 1997.

                          For the current operating budget for 1998, the Finance
                          Director, based on the time worked by each employee,
                          planned to allocate salaries and wages to all the programs.

                          The Springfield Housing Authority did not have a
 Allocation of Indirect
                          supportable method to allocate the indirect administrative
 Administrative Costs
                          costs it charged to the programs it operated. These
 Were Not Supported
                          included costs such as utilities, health insurance, equipment
                          rental, office equipment, automobile expenses and office
                          supplies. The Authority allocated the costs based on past
                          practices and experience. There was no study to support
                          the allocation amounts. For example, the Authority charged
                          gasoline entirely to the Low-Income Housing Program even
                          though two of its thirteen vehicles were exclusively used by
                          the Section 8 Program. The Authority also did not allocate
                          any of the utility and maintenance costs for the main office
                          or maintenance buildings to other programs, even though
                          other programs benefited from them. The Authority
                          charged these costs exclusively to the Low-Income Housing
                          Program. The former Acting Director of Finance who was
                          responsible for the allocation of costs was no longer
                          working at the Authority. The present Director planned to
                          re-allocate costs for 1998.

                          We attribute the lack of formal accounting and other
                          records that support the allocation of the indirect costs to a
                          high turnover of the management staff. In particular, there
                          have been four Executive Directors and five Directors of
                          Finance since 1994. The present Director of Finance joined
                          the Authority in December 1997. Without adequate
                          documentation to support indirect costs, HUD and the
                          Authority can not be assured that the allocated costs are
                          reasonable or appropriate in relation to the benefits they
                          derived from the indirect costs.




99-CH-202-1001                 Page 66
                                                                            Finding 9



                    Excerpts from the Executive Director’s comments on our draft
Auditee Comments    finding follow. Appendix B contains the complete text of the
                    comments.

                    The Director of Finance obtained documentation that
                    supported the current distribution of actual activity by
                    employees in April 1998. This provided a base distribution
                    which will be updated periodically to properly allocate salaries
                    and wages.

                    An allocation plan will be developed by the end of the calendar
                    year for indirect costs, such as utilities, equipment rental, office
                    equipment, automobile expenses, and office supplies.


                    The actions mentioned in the Executive Director’s comments
OIG Evaluation of   when fully implemented will address our recommendation.
Auditee Comments


Recommendations     We recommend that HUD’s Director of Public Housing Hub in
                    the Cleveland Office assures that the Springfield Metropolitan
                    Housing Authority:

                    9A.     Implement a method that allocates indirect costs to all
                            programs an equitable basis. The method should be in
                            accordance with Office of Management and Budget
                            Circular A-87 and supporting documentation should be
                            maintained.




                             Page67                                    99-CH-202-1001
                                                                                            Finding 10


             The Authority Needs To Improve Its
              Controls For Safeguarding Assets
The Springfield Metropolitan Housing Authority did not have effective controls to safeguard its assets.
Specifically, it did not: (1) adequately segregate the duties of its employees for cash receipts and
disbursements; (2) always review the biweekly payroll timesheets; (3) deposit rent receipts in a timely
manner; (4) maintain effective controls over its supplies and materials; and (5) properly safeguard
computer back-up disks. The Housing Authority’s management had not given adequate attention to
implement effective procedures and controls. As a result, the Authority increased the risk that its cash
and materials could be diverted.


                                       Internal controls are intended to provide reasonable
 Requirements For
                                       assurance that program goals are met, resources are
 Effective Controls
                                       adequately safeguarded and efficiently utilized, and laws and
                                       regulations are complied with. The important features of an
                                       effective system of internal controls are:

                                       •   Controls should be established early in a transaction and
                                           carried through its completion.

                                       •   No person should have complete control over all phases
                                           of any significant transaction.

                                       •   Work should flow from one employee to another
                                           without ever returning to an employee.

                                       •   Record keeping should be separate from operations or
                                           the handling and custody of assets. For example, the
                                           bookkeeping function should be separate from cash
                                           receipt and disbursement functions.

                                       The Housing Authority did not properly segregate
 Duties Were Not
                                       employees’ duties over its cash receipts and disbursement
 Adequately Segregated
                                       functions.

                                       Cash Receipts

                                       The Receptionist, who was also a tenant, retained full
                                       control over the rent payments from the time they were
                                       collected at the Authority’s office until they were deposited
                                       with the bank. She opened the mail, collected tenant rent
                                       payments, and prepared bank deposits. The Authority did

                                                Page69                                  99-CH-202-1001
Finding 10


                 not always issue receipts for rent collected. The data
                 processing personnel posted the tenants’ payments from
                 information provided by the Receptionist. The Receptionist
                 also had the opportunity to substitute other tenants
                 unrecorded rent payment checks or money orders for her
                 rent. Thus, rent collections were susceptible to waste, loss,
                 and misuse. In January 1998, the Receptionist was charged
                 by the Springfield Police Department for stealing two
                 money orders for $282 that were paid as rent payments by
                 another tenant.

                 During our audit, in March 1998, the Authority improved
                 its controls over rent collections at its office. A person
                 other than the Receptionist prepared and deposited the rent
                 receipts. The Authority also started issuing pre-numbered
                 receipts for all tenant rents.

                 However, the Authority’s controls for collection of rents at
                 its elderly high-rise buildings were still weak.        The
                 bookkeeper collected the rent payments and also had access
                 to tenants’ account receivable records.          Thus the
                 bookkeeper could make adjustments to tenants’ accounts
                 receivable records and effectively have control over the
                 tenant account balances. Although there was no indication
                 that the bookkeeper took advantage of the opportunity to
                 divert rent collections, the bookkeeper could have diverted
                 funds without detection, by adjusting entries to tenant
                 accounts receivable records.

                 Cash Disbursements

                 The bookkeeper had access to checks, signature plates, and
                 the Authority’s check signing machine. This employee also
                 reconciled the checking accounts. The duties performed by
                 the bookkeeper provided an opportunity to prepare a check
                 for personal use and cover up the diversion of Authority
                 funds by controlling accounting entries. During our audit,
                 in April 1998, the Authority segregated the duties. Instead
                 of the bookkeeper, the Data Processing Specialist is now
                 responsible for reconciling the checking accounts. The
                 bookkeeper also no longer has access to the signature plates
                 and check signing machine. We believe these segregated
                 duties if maintained should provide the proper checks and
                 balances for the cash disbursements function.


99-CH-202-1001        Page 70
                                                                            Finding 10




                           The Authority did not always review the biweekly payroll
Payroll Time Sheets Were
                           time sheets of its part time security personnel. As a result,
Not Always Reviewed
                           there was no assurance that security personnel were only
                           paid for hours worked. The Authority employed about 18
                           to 19 local police officers as part time security personnel.
                           For a four month period, between January and April 1998,
                           the Authority reviewed and approved time sheets for only
                           one of the eight biweekly payroll periods. The Executive
                           Director said he use to review and approve the time sheets
                           but for some unknown reason stopped doing it. He could
                           not remember the reason. The Authority’s Tenant Service
                           Coordinator said he was asked to start reviewing and
                           approving the time sheets starting with the first payroll of
                           April 1998. The Coordinator reviewed the time sheets for
                           the first payroll in April 1998 but did not review any after
                           that time. The Coordinator did not have an explanation on
                           why he stopped reviewing the time sheets.

                           The Authority did not deposit the rent receipts in a timely
Rent Receipts Were Not     manner. We reviewed 16 bank deposits between April and
Deposited Timely           July 1997. Eleven deposits were not made in a timely
                           manner. The delays ranged from two to 13 days. For
                           example, the Authority collected $892 on June 26 but did
                           not deposit these funds until July 9, 1997, a delay of 13
                           days. In another instance, the Authority collected $16,723
                           on April 4, 1997 but did not deposit these funds until April
                           11, 1997, a delay of seven days. The Authority took
                           unnecessary risks by keeping the rent receipts on the
                           premises for an excessive time period.

                           The Authority did not keep its maintenance supplies in a
Controls Over
                           secured area. The Authority stored building supplies in
Maintenance Supplies
                           garages at scattered site units. As a result, they were
Were Inadequate
                           susceptible to loss. The Maintenance Director told us that
                           he will centralize the storage of supplies in a secure area.
                           The Authority also did not accurately keep track of the
                           inventory in stock. An accurate inventory record is
                           necessary to assure that duplicate items are not purchased.
                           For example, the Authority purchased a tub surround in
                           February 1998, because it did not know that it already had
                           two tub surrounds in its inventory.




                                   Page71                                99-CH-202-1001
Finding 10


                    The Housing Authority did not properly protected its back-
                    up computer disks. Back-up computer disks are maintained
                    in case the original disks are damaged or destroyed. The
                    Housing Authority stored the back-up computer discs on
                    top of a computer instead of in a secure area. The
                    Authority also did not require computer passwords to be
                    changed periodically. The changing of passwords makes it
                    more difficult for unauthorized computer access.


                    A complete text of the Executive Director’s comments follow.
 Auditee Comments   Appendix B also contains the complete text of the comments.

                    The following changes (many during the time the Inspector
                    General was here) have been implemented:

                    Rent Collection

                    1. The former Receptionist was discharged after an
                       investigation was initiated by the current Executive
                       Director.

                    2. A new Receptionist was hired and reports to the Finance
                       Director.

                    3. New procedures were initiated by the Finance Director
                       which include:

                       a. Mail is now opened by the Executive Assistant or
                          designated backup under the supervision of the
                          Executive Director.

                       b. Copies of all checks, money orders, or other cash items
                          is made and retained for audit purposes by the back up
                          to the Executive Assistant or receptionist.

                       c. Pre-numbered receipts are either given to residents or
                          mailed to residents for all receipts.

                       d. The receptionist batch totals are compared with the
                          duplicate receipt copies and tapes of the checks or
                          money orders received.




99-CH-202-1001           Page 72
                                                    Finding 10


   e. A person other than and distinct from the bookkeeper
      now collects rent payments at the elderly high-rises.
      The person is from another department than finance.

   f. Other finance department personnel prepare the bank
      deposit and balance to the receipt copies.

   g. The Springfield Police Department takes the deposits
      to the bank daily during rent collection time.

   h. Separate finance department personnel post receipts to
      the detail for resident receivable records.

   i.   The Finance Director investigates all resident receivable
        queries.

Cash Disbursements

1. The process of reconciling the checking account has been
   moved to the Data Processing Specialist.

2. The check signing plates are kept locked in the Finance
   Director’s office until the running of authorized checks.

Payroll Time Sheets

The time sheets for the part-time security personnel are
submitted by the officers, reviewed by the bookkeeper, the
Finance Director, and the Executive Director.

Rent Receipts Deposits

1. The Finance Director has conducted finance staff meetings
   and re-emphasized the importance of timely deposits.

2. An objective of timely deposits has been added to the
   bookkeeper’s quantitative job responsibilities and will be
   used for performance evaluations.

3. The Finance Director has worked out a daily schedule of
   balancing of cash receipts by 11:00 a.m. by the receptionist,
   preparing the bank deposit and balancing by the
   bookkeeper by 1:30 p.m., and pick up by the police officers
   the same day.


        Page73                                   99-CH-202-1001
Finding 10


                     Computer Backup Safeguards

                     Computer backup files are removed from the top of a
                     computer and are now locked in fire resistant files and a safe.

                     The Springfield Metropolitan Housing Authority is in the
                     process of changing all computer pass words. This will be
                     completed by the end of September. They will be changed
                     semi-annually thereafter.

                     Inventory Controls

                     The Authority has established the following inventory controls:

                     1. Large items will be stored at one building.

                     2. Spring 1998, the parts room was enclosed with a cage, and
                        all personnel had to begin signing out parts and equipment.

                     3. August 1998, the Executive Director stopped the practice
                        of employees taking equipment for personal use.

                     4. A general inventory of all items on the inventory list was
                        conducted in Spring 1998. The list is now up to date, and
                        new items are being added as they are purchased.

                     5. One person is now in charge of procurement, with the
                        Finance Department monitoring the documentation for
                        payment of items purchased.

                     6. There is a person identified for parts and equipment
                        supplies. She has been trained and is responsible for

                     7. Over sight of the distribution of parts and equipment.


                     The procedures and controls mentioned in the Executive
 OIG Evaluation of   Director’s comments if fully implemented should resolve the
 Auditee Comments    issues in the finding.




99-CH-202-1001            Page 74
                                                                       Finding 10



Recommendations   We recommend that HUD’s Director of Public Housing Hub in
                  the Cleveland Office assures the Housing Authority:

                  10A.   Keeps the duties of its employees segregated for rents
                         collected at its office and segregates the duties for rents
                         collected at its elderly high-rise buildings.           No
                         employee should have complete control over a
                         significant transaction.

                  10B.   Establishes procedures and controls to assure: all
                         payroll timesheets are reviewed timely; rent receipts are
                         deposited in timely manner; maintenance supplies are
                         kept in a secured area; and the computer back-up discs
                         are safeguarded in a secure area.




                         Page75                                    99-CH-202-1001
                                                                                           Finding 10



In planning and performing our audit, we considered the management controls of the Springfield
Metropolitan Housing Authority in order to determine our auditing procedures, not to provide
assurance on the controls. Management controls include the plan of organization, methods and
procedures adopted by management to ensure that its goals are met. Management controls include the
processes for planning, organizing, directing, and controlling program operations. They include the
systems for measuring, reporting, and monitoring program performance.


                                      We determined the following management controls were
 Relevant Management
                                      relevant to our audit objectives:
 Controls

                                      ·   Program Operations - Policies and procedures that
                                          management has implemented to reasonably ensure that a
                                          program meets its objectives.

                                      ·   Validity and Reliability of Data - Policies and procedures
                                          that management has implemented to reasonably ensure
                                          that valid and reliable data are obtained, maintained, and
                                          fairly disclosed in reports.

                                      ·   Compliance with Laws and Regulations - Policies and
                                          procedures that management has implemented to
                                          reasonably ensure that resource use is consistent with laws
                                          and regulations.

                                      ·   Safeguarding Resources - Policies and procedures that
                                          management has implemented to reasonably ensure that
                                          resources are safeguarded against waste, loss, and misuse.

                                      We assessed all of the relevant controls identified above.

                                      It is a significant weakness if management controls do not
                                      provide reasonable assurance that the process for planning,
                                      organizing, directing, and controlling program operations will
                                      meet an organization’s objectives.

                                      Based on our review, we believe the following items are
 Significant Weaknesses
                                      significant weaknesses:




                                              Page77                                   99-CH-202-1001
Management Controls


                      ·   Program Operations

                          The Authority was not operated according to program
                          requirements (see Finding 1). Specifically, the Authority
                          did not follow proper vendor payment procedures when it
                          paid $38,437 for ineligible and unsupported costs (see
                          Finding 2). In addition, the Authority did not: assure that
                          it maintained an acceptable occupancy level; assure that its
                          inspectors conducted adequate inspections of the Section 8
                          units; follow proper procurement practices; use its
                          modernization grant funds in an efficient manner; correctly
                          charge the Comprehensive Grant Program; follow travel
                          requirements; have a cost allocation plan; and have
                          effective controls to safeguard its assets (see Findings 3, 4,
                          5, 6, 7, 8, 9, and 10).

                      ·   Compliance with Laws and Regulations

                          The Authority did not operated in accordance with
                          program requirements (see Finding 1). Further, the
                          Housing Authority did not follow HUD’s requirements, the
                          Office of Management and Budget Circular A-87, and the
                          Annual Contributions Contract regarding: (1) cash
                          disbursements; (2) Comprehensive Grant Program; (3)
                          Section 8 unit inspections; (4) Vacancies; (5) Procurement
                          Practices; (6) Controls over safeguarding assets; (7) travel
                          requirements; and (8) cost allocation plans (see Findings 2,
                          3, 4, 5, 6, 7, 8, 9, and 10).

                      ·   Safeguarding Resources.      The Housing Authority
                          inappropriately: paid $38,437 for ineligible and
                          unsupported expenses; and incurred costs of $95,558 that
                          were unnecessary or unsupported; and paid $5,311 in
                          unsupported travel advances and mileage costs (see
                          Findings 2, 6, and 8).




99-CH-202-1001             Page 78
                                                                                      Finding 10



The Office of Inspector General issued an audit report on the Springfield Metropolitan Housing
Authority on April 1, 1993, pertaining to the operations of its Low-Income Housing Program (Audit
Case Number 93-CH-204-1016). The report contained seven findings. There were no open findings
from that report. Three findings are repeated in this report.


       Report Number 93-CH-204-1016                                This Report

Internal Controls Need To Be                     The Authority Needs To Improve Its Controls
Strengthened (Finding 3).                        For Safeguarding Assets (Finding 10).

Allocation of Indirect Costs To Various          The Authority Could Not Support the
Programs Was Not Supported (Finding 6).          Allocation of Indirect Costs (Finding 9).

Travel Policy Needs To Be Revised                The Authority Did Not Follow Travel
and Followed (Finding 7).                        Requirements (Finding 8).


The latest single audit covered the fiscal year ended September 30, 1995. The report contained
six findings. None of the findings are repeated in this report.




                                             Page79                                99-CH-202-1001
                                                                                    Appendix A


Schedule Of Questioned Costs
         Recommendation                   Type of Questioned Costs
           Number                       Ineligible 1/ Unsupported 2/

            2B                        $33,445
            2C                          2,300
            2D                                           $ 2,692
            6A                           1,970
            6B                                            93,588
            8C                                             5,311
           Total                      $37,715           $101,591



1/   Ineligible costs are costs charged to a HUD-financed or insured program or activity that
     the auditor believes are not allowable by law, contract, or Federal, State, or local policies
     or regulations.

2/   Unsupported costs are costs charged to a HUD-financed or insured program or activity
     and eligibility cannot be determined at the time of audit. The costs are not supported by
     adequate documentation or there is a need for a legal or administrative determination on
     the eligibility of the cost. Unsupported costs require a future decision by HUD program
     officials. This decision, in addition to obtaining supporting documentation, might involve a
     legal interpretation or clarification of Departmental policies and procedures.




                                        Page 81                                   99-CH-202-1001
                                                                                          Appendix B


Auditee Comments
                               INSPECTOR GENERALS FINDING

           "The Authority Was Not Operated According To Program Requirements

In general, this finding is true, however, it fails to mention the internal control changes already
completed which are reported in the SMHA responses to the findings. In addition, it does not mention
that the executive director provided a short written report about the conditions at SMHA and later met
with and explained in more detail the problems. Many of the problems reported to the Inspector
General are found in their findings. Finally, it did not distinguish between problems prior to September
1996 and current problems. Each identified areas will be briefly discussed below:

· "Did not have vendor payment procedures" - The problems with the former Director of Maintenance
and Modernization are well documented, and steps have been initiated to recover most of the loss.
Since this incident internal controls have been implemented to help prevent further abuses of this
nature.

· "Experienced a steady increase in its vacancy rate" - In the response provided it was noted that some
of the vacancy rate issue is directly related to strong lease enforcement, and tougher screening of
applicants. This has begun to turn around with improvements in both Section 8 staffing and Public
Housing staff. Also, a professional trainer was brought to SMHA to train the staff for both programs.

· "Did not conduct quality control" - IN the SMHA response it was agreed that this is an area of need.
Since, the finding reply was issued a HUD trainer has been to SMHA and all effected staff have been
retrained. We have hired another contract inspector to monitor and provide quality controls to the
inspection program.

· "Did not follow proper procurement" - The response to the finding shows that most, if not all, of the
concerns listed in the finding have been addressed and cured.

· "Used $95,558 of modernization funds in an inefficient manner" - The SMHA response agreed with
this finding and then described the steps already taken to cure this problem.

· "Incorrectly charged ---management improvements to its Comprehensive Grant Program" - Again,
this was noted and steps were implemented to correct the issue.

· "Travel Policy" - The draft personnel policy contains the language recommended by the Inspector
General and will be presented for preliminary approval on September 15. Once the Board gives its
preliminary approval it will be released to both Unions and the agency attorney for review. It is
estimated that it will be presented to the Board at the November meeting for final action.

· "Did not have a proper cost allocation plan" - The SMHA response is that we have now developed a
plan. It will be fully implemented no later than December 1998.


                                              Page 83                                   99-CH-202-1001
Appendix B


· "Did not maintain effective controls to safeguard its assets" - In the SMHA response, details of the
various internal controls that have been implemented, and a summary of the inventory controls
implemented were discussed.

The Inspector General noted that SMHA has had three executive directors and one interim director. It
did not note that the current executive director contracted with NAHRO to conduct a strategic plan for
SMHA, nor that the process of this plan was impaired by non-action by the Commissioners. The
Commissioners themselves have discussed this as an issue to be revisited. If HUD can provide
technical training to SMHA for the development of a stregic plan and provide oversight of its
implementation, its assistance will be appreciated.

The employee evaluation system used by SMHA is adequate. The supervisors are encouraged to add
notes to the form provided which are specific to the job being evaluated. This gives SMHA
consistency and individuality in its evaluations.

In regard to the recommendations:

1. Technical assistance from HUD will be appreciated.
2. Assistance from HUD in developing a plan which will set goals, direction, and initiatives will be
appreciated. SMHA will implement such a plan.
3. Performance evaluations are in place, as described above.
4. Significant improvement in implementing controls over expenditures - See responses to previous
Inspector General findings.
5. Board of Commissioners - The Inspector General did not provide detail as to what is needed for the
Commissioners. If HUD wishes to provide technical training for Commissioners, it will be welcome.




99-CH-202-1001                              Page 84
                                                                                           Appendix B


                              Response to Inspector General’s Finding
                "The Authority Paid $38,437.00 for Ineligible and Unsupported Costs"

The executive director is the CEO of the PHA, and in this capacity is responsible for everything, Good
management principles clearly teach that the CEO must delegate authority to those persons who have
proper credentials. The Directors of Maintenance and Finance in place when most of the findings
happened were screened and found to have good credentials, and the references expressed their good
character. A system of checks and balances was established between the two departments in order to
prevent fraud and theft. When the activities mentioned in the report were taken neither person had
been employed for six months. In fact, both persons were dismissed once the problems were identified.
The Director of Finance was not dismissed for the activities in your report, but the Director of
Maintenance was.

The executive director denies circumventing the vendor payment procedures outlined in the Inspector
General’s finding. He followed the procedures that were in place at the time. The executive director
should not need to review each document that is part of procurement, and he should delegate this detail
to other staff. Specifically, the Finance Director did not verify the documentation, and the Maintenance
Director was dishonest and is under investigation for theft. The system in place worked if the two
department heads were functioning.

When the executive director began employment in September 1996, the Authority was not following
vendor payment procedures. One person was reported to be the purchasing agent, but she was buying
from family and friends. When this practice was stopped, she resigned her position.

Since beginning work, the executive director has written a new Procurement Policy containing
acceptable checks and balances. He has also assigned procurement to one staff person, and has sent
that person to two training courses. He has also issued orders that all future procurement initiated by
any other staff must be signed off by the Procurement Person.

This finding largely relates to a set of circumstances I discovered and reported to the local Prosecuting
Attorney, the potential misrepresentation by the former Director of Maintenance. It was then turned
over to the FBI for investigation, and there has been little communication from the FBI since. There
was a serious breakdown in the normal processing of invoices which was not reported to the executive
director. The Director of Finance was supposed to assure that all documents relating to a purchase
were in the file prior to bringing the payment authorization or check approval to the executive director.
The Finance Department did bring large piles of checks for approval, and it seemed always at the last
minute. At no time did the Finance Director bring to the executive director’s attention that purchases
did not have the proper documentation. When the payment was issued, it was assumed that all
documentation was in order. In fact, there were verbal communications from Finance that the
documentation was in the file.

Verification of materials delivered was delegated to the Maintenance Department. When materials are
received, they must be documented. The documentation of receipt of materials is then given to
Finance to be included in the file when payment is made.


                                                 Page85                                  99-CH-202-1001
Appendix B


During the period in question, there was a serious breakdown in the system. First, the executive
director, who had been on the job but six months, was attempting to reconstruct the Housing
Authority. He had found that most "good business practices" were not being followed, especially
procurement. The financial records were in complete disarray, the vacancy rate was climbing, and
maintenance had been deferred to the point where there were critical problems.

New Directors of Finance and Maintenance were hired. From their credentials and references they
appeared to be competent and honest persons. The executive director delegated the responsibility for
documenting the procurement and inventory control process between Finance and Maintenance. He
did not approve the payment of any item unless the Finance Department assured him that
documentation was in the file. .

After the executive director discovered that a fraudulent activity may have taken place by the
Maintenance Director, he immediately contacted the SMHA attorney for advice. The more he
investigated the deeper the problems appeared, until he contacted the Clark County Prosecutor’s
office and the FBI. Most of the cost items referred to in the I.G. report are related to the activity
initiated by the Director of Maintenance, e.g., $25,690.00 to Grunwald construction, $1,000.00 Boom
Rental, $6, 755.00 elevator parts, $2,200.00 water blaster and nail gun. Since these items are part of
an FBI investigation, and since their original purpose was to provide for services SMHA needed, they
should not require repayment until the FBI investigation is complete. It may be possible to recover
these funds if the FBI investigation proves fraud. The courts may attach the property of the former
Director of Maintenance, or there may be recoverable insurance funds. (The SMHA insurance
company has been notified of this potential claim.)

Because of the discovered problems, the executive director also began implementing changes to the
way procurement and inventory is processed. First, he began personally approving all checks by
requiring Finance to provide him the check with supporting documentation attached. All purchase
requisitions, except for those which are routine, were approved by him prior to the purchase. Much of
the activity was in the Comprehensive Grant program, and the executive director began closely
reviewing every item in the program. In fact, he asked the HUD office to not call other staff, but to
communicate with him directly.

A job description was developed for the procurement function, the person in the position was sent to
two training programs, and a new Procurement Policy was written and approved by the Board.

One error in Inspector General’s report is that the executive director approved payment "at the request
of the Maintenance Director." He only approved payment of bills recommended by the Finance
Director. This was supposed to be the check and balance in the system. Since the discovery of this
inadequacy steps have been taken to build better controls, and the management staff is continuing to
develop better controls. (See attached summary of the system now in place.)

In regard to the elevator payment, the same controls were in place. The Maintenance Director and the
Acting foreman both confirmed that there was a situation with the elevators that endangered the lives
of the residents. Without the knowledge or approval of the executive director the former Maintenance
Director fired the elevator company SMHA had a contract with, and hired All Pro Elevator to handle

99-CH-202-1001                               Page 86
                                                                                         Appendix B


the repairs. Because the problems with the elevators was deemed an emergency, the executive director
approved using All Pro to service the elevators until proper bidding and procurement could be
completed. The executive director was not informed until this finding was presented to him that
$6,755.00 worth of elevator parts had not been delivered. The documentation should have been in the
file if Finance brought the item for payment approval.

(On July 8, 1998, the All Pro Elevator Company paid SMHA with a check for $6,755.00. They also
stated that the check in question was part of an FBI investigation they began. The FBI arrested Mr.
Turpin at the time, but wanted to continue the investigation to see if others at SMHA were involved.
No report of this was made to SMHA. See attached)

As mentioned earlier, the system was changed once the problem was identified.

One of the most problematic issues of SMHA was economic viability. For the two years prior to the
hiring of the current executive director SMHA had over spent its budget and had been over
$100,000.00+ each year in the red. HUD staff was concerned about the potential of SMHA going
bankrupt. A very big part of keeping the authority operating was to monitor the cash flow. When the
compactor was first conceived, it appeared to meet both the problems of removing trash, and of
lowering the expenses. Through a lease the payments would be consistent from month to month. The
total cost of trash removal would be less than the dumpsters. Since Housing Authorities often lease
equipment this did not seem to be in violation. Housing Authorities lease copiers, vehicles, computer
systems, etc. It was not until HUD brought the leasing issue to light that it was addressed.
Immediately, the contract was paid off. There was no attempt to circumvent the rules, but the purpose
was to enhance the cash flow of SMHA. The interest and charges should not be required to be paid
back.

The general contractor’s license was purchased as part of a new program designed to provide Public
Housing residents with home ownership opportunities. In fact, at a meeting HUD held on June 19 -
20, in Canton, OH. the 203K program was one of the home ownership tools HUD strongly
encouraged PHA’s to explore. Sometime in the Spring of 1997, a meeting was held at the HUD
offices in Columbus with representation from the City of Springfield, a Columbus based lending
institution, several departments of HUD, and SMHA to discuss how the 203K program could be
encouraged in Springfield. The area most often identified as the barrier to 203K was the lack of a
general contractor. It was discussed that SMHA could provide this function since it was already doing
general contract type work in its Comp. Grant program.

This concept was discussed with the Board of Commissioners on several occasions, and the Board
gave it their enthusiastic support. A plan was devised to create a nonprofit entity which could be a
general contractor, and thus keep the accounting separate from SMHA accounting. During the
interim, while this nonprofit was being created, the SMHA would be available to do this kind of work.
SMHA needed a general contractor’s license to do that. Because of circumstances which developed
later the nonprofit corporation was never created. SMHA has had opportunities to provide general
contracting work on potential 203K projects during this period, but none have every resulted in actual
contracting work. The licenses were in support of this program.


                                               Page87                                 99-CH-202-1001
Appendix B


The $58.00 for a horse race outing was not known to the executive director until this finding was
produced.




99-CH-202-1001                            Page 88
                                                                                        Appendix B


                                  Inspector General’s Finding

                 "The Authority Has An Excessive Number of Vacant Units"

This finding is accurate in the fact that there are excessive vacancies and the process has not been
adequately fine tuned. It is in error in making assumptions based on the comments of staff who
are not in a position to know the entire situation, and projecting the thoughts of the Auditors
developed from this input. The following summary will provide insight to the problem and the
steps taken to correct the problem.

The executive director began employment on September 16, 1998. Shortly thereafter he reviewed
the tenant accounts receivable and discovered long standing overdue rent payments. It was
reported that these were the result of favoritism by staff and Commissioners. He was informed
that certain residents were "protected" and could not be evicted. The executive director issued
orders that there would be no favoritism and that the lease would be enforced. In one month fifty
eviction notices were issued. Once the word of the lease enforcement was spread, other residents
moved out, causing a glut in vacant units. This occurred during the January and February 1997
period. As part of a PHMAP Improvement Plan there have been monthly meetings with the HUD
staff and every item of the vacancy problem has been discussed with HUD. SMHA’s action was
discussed with Julia Brown and David Kellner at the HUD Columbus office. They concurred that
SMHA must enforce the lease even if it worsens the vacancy problem.

The executive director found that there were units off line for almost a year when he began
employment. He issued direction to the maintenance department that they should begin with the
oldest unit and move toward the newest vacant unit. Immediate resistence from both maintenance
and operations was expressed. They commented that the oldest units were located in the area
most difficult to rent. There was resistence to turning these units around.

The Director of Maintenance and Modernization during the months February to September 1997,
made reports of progress in turning units around for occupancy. Unknown to the executive
director or Board of Commissioners, he had taken a comment from one HUD staff member to
"deprogram units." What he did was take the units in need of the most work off line and allow
them to remain untouched. He stated his plan was to include them in the Comprehensive Grant
budget for the next year, and hire all of the work done by a contractor. He never followed
through on this and the thirty-two units were allowed to sit untouched. This made the PHMAP
score worse. Currently, there are only two of those units not ready.

Another factor is that HUD was not provided accurate data prior to September 1996. The
executive director has been in steady contact with the Columbus HUD office as discoveries were
made. The lack of adequate reporting and the decisions by SMHA leadership allowed the vacant
unit problem to grow into unacceptable proportions. Serious steps were called for, and when the
current Director of Maintenance and Modernization was hired, he was instructed to find a
solution to the unit turn around time. A new form for tracking the process of turn around time
was created and implemented. For the first time there is documentation of when a unit is vacated


                                               Page89                                 99-CH-202-1001
Appendix B


and when it is re-rented. This form also tracks the process from inspection to lease signing.
SMHA now has accurate, documented data.

The Operations Department had not done solid screening prior to September 1996. The police
screen consisted of only Springfield Police records. There was no credit report in the files, and
past landlord information was often suspect. As was mentioned earlier, there appeared to be
favoritism in tenant selection, and some of the residents did not have the lease enforced when they
were involved.

The PHDEP Security effort was burdened by having two entities providing security services, and
limited communications or cooperation between them. In addition, certain Commissioners were
demanding a change. Even to this time one Commissioner is demanding the Police Program be
discontinued and replaced by a private security firm. This erodes the ability to market units
located in potentially higher crime areas.

The executive director gave operations direction to use a screening service. After researching the
alternatives, FABCO was recommended, and SMHA began screening a wider area of police
information. In addition, SMHA has begun obtaining credit checks on applicants they expect to
be housed. This is designed to produce a better resident, and to reduce the time and costs of
major repairs when the resident moves out. It has also eliminated some applicants.

The staff level of the operations department was insufficient to handle the work required to
process applications in a timely manner. Additional staff was authorized in 1997, and the result is
fewer vacant units. This trend will continue providing the maintenance department can prepare
the units in a timely fashion. With this in mind the following steps have been taken:

1. A sign in and sign off sheet has been used. When the resident turns the key into operations,
they sign and date a form. When they turn the keys over to maintenance, maintenance signs and
dates the form. When maintenance completes unit preparation and returns the keys, the form is
again signed and dated.

2. Discussions with both maintenance and operations directors resulted in the maintenance
department agreeing to inform operations of units nearly ready to be turned over to them.
Operations then begins the process of screening the next person on the waiting list.

3. The maintenance department evaluates each vacant unit, and based on the needs of the unit
assigns it to a make ready team. In consultation with the Columbus HUD office the oldest most
damaged units are being cleaned first. This is to help reduce the turn around time the PHMAP
measures. Once those units are repaired, the other, less time consuming units will be processed.
Once SMHA reaches this point the maintenance department has stated they can keep up with the
move out rate.

4. When the keys are turned over to maintenance a move-out inspection is scheduled. This
inspection provides information about the required repairs, and can provide guidance about the


99-CH-202-1001                              Page 90
                                                                                     Appendix B


potential costs. Based on this information and information provided by operations a decision will
be made about scheduling the make ready work.

5. Attached memos from the Director of Operations and the Director of Maintenance and
Modernization provide more detail about the current process.




                                             Page91                                99-CH-202-1001
Appendix B



Memo
To:           Harold T. Riedel, Jr., Executive Director

From:         Anita Perrin, Housing Operations Director

Subject:      Inspector General Finding - Excessive Vacant Units

Date:         August 6, 1998



The 42 day lease-up time has been reduced significantly due to the coordination of Maintenance
and Operations. Maintenance is projecting ready dates and these dates are becoming more and
more on target. In addition, Operations has utilized additional staff since March 1998, contracted
with a screening agency for credit and criminal history and can now begin the updating of
applicant files earlier with the additional staff.

Prior to March 1998, the Occupancy Coordinators were responsible for all facets of housing,
updating intake files, showing units, resident orientations, leasing, lease enforcement, complaints,
recertifications, interim rent adjustments, informal hearings, evictions, security deposit
dispositions, reports, returning NSF checks, vacated accounts with balance write-offs, rent
arrangements and processing rent payments that come in at the wrong amounts. They now each,
have an Occupancy Assistant to split their duties.

We are presently doing the following to reduce the vacancies and reduce tenant damages.

Allowing a six month delay in processing resident rent changes due to starting a new job with a
higher pay rate effective July 1, 1998.

Established an one year occupancy requirement before a resident is allowed to transfer to the
Section 8 Housing Assistance Program or move-out of their Public Housing unit.

Within the first three months, have the SITE staff person visit new residents and do an
assessment of the unit while there.




99-CH-202-1001                              Page 92
                                                                                      Appendix B



TO:         Mr. Harold Riedel
            Executive Director

From:       Charles Brimmer
            Maintenance Director

August 6, 1998

Upon hiring, you made it very clear that you wanted someone to take and active role in the
everyday operations of the maintenance department.

Your concern was the vacant units, and this was our goal. We have had several meetings with
Columbus HUD and this was their position as well.

We have now in place a better system of counting the vacant units, and also have forms on file to
show when the units became vacant. And to show the turn around time and the time they are
returned to operations. We have taken steps to return those units taken off line by the former
maintenance director to the operations department for occupancy. Several of these were early 97
late 97, as of August 98 there remains only three and we have started those units. They should be
returned to operations by the end of August 98.

We have also turned units over that were vacant in 98. We are not just looking at 97 vacant
units. But in keeping with regulations, we should be turning those units that have been setting the
longest time out.

In your report, you wrote about the sign in sign off sheet. This is being done. Meetings are
being held, with operations as to when they can expect units to return for occupancy.

We have been costing out the repairs as needed. We do need more time to get turn around time
under control. Once we have the vacancy count under some control, then we can start to do
some of the other things needed.

We are improving, we have a ways to go.

Our goal is to reach a 98% or better occupancy rating and do it the right way.




                                              Page93                                99-CH-202-1001
Appendix B


                               Supplemental Information to the

                             INSPECTOR GENERAL FINDING

                  "The Authority Has An Excessive Number Of Vacancies"

Immediately following his hire in September 1996, the executive director issued a memo to
Operations stopping the practice of transferring residents from one unit to another. Unit transfers
were allowed only for persons with serious medical reasons. The reason for this was to stop the
duplicate work. When an existing family moves from one unit to another it means maintenance
must prepare both units, and there is no gain in occupancy.

Also, on about the same time, the executive director waived the unit size requirements. This was
to allow housing families in units larger than they would normally need. This was to be only until
the vacancy rate dropped, and a demand for the over housed resident’s unit was apparent. At that
time the over housed resident family would be required to relocate to a unit of appropriate size.




99-CH-202-1001                             Page 94
                                                                                     Appendix B


                          Response To Inspector General’s Finding

                        Section 8 Unit Inspections Were Not Adequate

The Springfield Metropolitan Housing Authority recognizes that Section 8 unit inspections are
not meeting HQS standards. Both Inspectors have been sent to professional training on HQS,
and both are experienced inspectors. The missing element has been quality control. To improve
this SMHA invited the HUD Construction Specialist, to provide a HQS training update for the
Inspectors. We have involved other SMHA staff as a cross training component. The training was
held on August 24 to 26, 1998.

As was noted in the finding, the quality control program was changed in April 1998. This was
necessary because (1) the Director of Operations did not have time each month to conduct quality
control inspections, and (2) SMHA needed a more objective view. An retired city Inspector was
hired because he understood the need for quality, and he had a strong background in inspections.
Unfortunately, he decided to accept permanent employment elsewhere and we are currently
without this service. SMHA is presently searching for another contract Inspector.

The performance appraisal used by SMHA is generic in that it measures a set of common
evaluation characteristics. There is room on the form for comments by the Supervisor to address
specific areas, and there always is the freedom to write an addendum to the form. Using the form
allows everyone’s performance to be measured equally. If the Supervisor wishes to add to the list
of measurements they may do so.

The Section 8 Administrative Plan is under revision currently, and the section on HQS will
contain the language:

"Owners of Section 8 units are required to correct all Housing Quality Standards violations within
thirty (30) days and all serious violations within twenty-four (24) hours; and its inspectors will
identify the serious violations in the inspection reports."




                                              Page95                               99-CH-202-1001
Appendix B


                           Response To Inspector General’s Finding

                 "The Authority did not Follow Proper Procurement Practices"

When the Inspector General’s staff began its review of the SMHA on February 2, 1998, the
executive director of SMHA provided them a report which outlined some of the problems
discovered since his hire on September 16, 1996. One of the top issues was the failure of SMHA
to follow its adopted policies. To quote, " If SMHA had adopted policies, I could not find them.
I asked for copies of the procurement policy, disposition policy, investment policy, etc. No one
could find anything. After six weeks I was given a faded out copy of the personnel policy. After
six months I finally found a partial copy of the procurement policy."

On page 7 of the report he states, "6. Using the HUD model procurement policy I have written a
policy for the Finance Committee to consider. The procurement policy adopted by the Board
years ago could not be found until late summer. Procurement was being done on a "good old
boy" basis. Friends and relatives were getting SMHA’s business. When I stopped this practice,
the procurement practices are much improved."

Since this report was provided the Inspector General several additional changes have been made
to assure proper competitive procurement. A new Procurement Policy written after the HUD
model. It was written by the executive director and approved by the Board of Commissioners.
One staff member has been assigned the responsibility for oversight of all procurement. This
person has attended two professional training course on procurement and was involved in the
development of the new policy. All procurement must now be cleared through this person.

The Inspector General was previously given three pages of procedural changes which outline in
detail how procurement is presently being conducted. (Copies attached.) One of the major
changes is to make the Finance Director responsible for assuring that all purchases have proper
documentation of both receipts and that the amount was proper. Goods must be signed off when
delivered.

In response to the specific comments the following is offered:

1. Marathon Oil for $18,510.00 for the purchase of a trash compactor. SMHA was replacing
three large dumpsters with one compactor. After investigation it was apparent the compactor
could save SMHA up to $1,000.00 per month and the unsightly dumpsters would be removed.
SMHA had a contract for refuse removal with the BFI company, which later sold out to Waste
Management. We were informed that BFI would not provide service to a compactor they did not
provide, and we were contractually obligated to BFI. It was apparent that BFI was the sole
source provider for the compactor. Marathon Oil was the subsidiary company BFI used for
compactor contracts.

All Pro Elevator for $65,200.00. The former Director of Maintenance and Modernization
reported the elevator servicing company of record had not been performing the proper and
necessary maintenance on the elevators. After a State of Ohio inspection report it was clear that

99-CH-202-1001                             Page 96
                                                                                      Appendix B


several elevators were in danger of failing and could endanger the lives of any passengers aboard.
The elevator servicing company was fired, and All Pro Elevator was hired on a temporary basis
until proper procurement could take place. Subsequent to this both the Director of Finance and
the Director of Maintenance and Modernization left the employment of SMHA, and there was a
longer period of time between the firing of the elevator company and procurement of new
services. Because of the severe nature of the elevator problems it was necessary to make several
important and expensive decisions and certain expensive work was approved during the interim.

Cole, Acton, Harmon and Dunn for $201,098. When the SMHA was created this firm provided
work for no charge for several years. There has never been a contract for these services, and
there has never been competitive solicitation of qualifications or proposals. The procurement staff
has been instructed to prepare a solicitation of qualifications, and a competitive process, as
outlined in the Procurement Policy, will be processed. This will be complete by the end of 1998.

Roger Storer Plumbing for $239,755.00. The executive director noted this discrepancy in 1997,
and required all future solicitation for plumbing services follow the procurement policy.

Grunwald Construction for $25,690.00. This may be a fraudulent purchase which has been
reported to the FBI for investigation.

Casterline Associates for $48,214.00. In December, 1996 the Comptroller for SMHA was fired.
The executive director immediately contacted the auditor of record, John Slaybough and
Company, requesting assistance. A date for an initial meeting was established for December 26,
1996. Mr. Slaybough never showed up for the meeting, and he refused to return calls. His staff
informed the executive director he was not interested in developing a plan for SMHA’s finance
records.

The executive director also contacted a local CPA firm who has had some experience with
government program accounting. After several discussions they decided they were facing tax
season and would not have the time. He then contacted the Dayton Housing Authority for
assistance and they sent their finance staff to Springfield to evaluate and decide what they may be
able to assist with. Their evaluation concluded that the finance records were in such poor
condition that they could not cope with them. They then recommended Casterline Associates.
Understanding the severity of need, and the fact it was an emergency to get the accounting
functions improved, a contract was agreed on.

Computer Free America for $92,195.00. The computer system was already planned when the
executive director came to SMHA. He insisted that there be proposals from other companies, and
the person in charge of computer procurement (this was before any structure in procurement was
developed) solicit competitive bids. She reported that no one then working at SMHA knew how
to solicit proposals. The executive director provided a quick set of instructions, and Computer
Free America was chosen. There was also a committee consisting of staff from the various
departments who evaluated the proposals, and the selection was made on the recommendation of
the committee. (See attached memo)


                                              Page97                                99-CH-202-1001
Appendix B


Data Directions for $17,458. Data Directions was the computer soft ware in place when the
computer upgrade was made. The choice was to upgrade the system or to change computer
software. When the cost of data conversion was added to the cost of the software it became
apparent that continuing with Data Directions made the most sense. In addition, the staff was
very pleased with the Data Direction software they had been using for years. Data Directions was
the sole source provider.

Finally, A & B Lawncare for $31,235.00. This was a contract negotiated by the former Director
of Maintenance and Modernization which did not have competitive bidding. It was to be a short
term testing of the company’s quality and limited to a few projects. With out informing the
executive director the contract was expanded slowly and soon it became a large contract. This
company is no longer working for SMHA, and all lawn care contracts are now being procured
using the approved procurement policy.

In terms of the recommendations:

1. One person has been assigned the responsibility for all procurement, and the Director’s of
Finance and Maintenance and Modernization both have check and balance roles in procurement.

2. The contract for legal services will be advertised before the end of 1998. Contracts for boiler
repair services is now being procured according to the approved policy.

3. All the recommendation in recommendation C have been previously implemented.




99-CH-202-1001                             Page 98
                                                                                     Appendix B


                         PURCHASING AND RECEIVING
                           FOR SMALL PURCHASES

1.    Supply requisition initiated by employee needing material
2.    Supply requisition signed by requester and Foreman or Supervisor
3.    Foreman or Supervisor gives signed supply requisition to procurement officer.
4.    Procurement officer finds materials that meet requesters requirements. If purchase is over
      $2,500.00 for a single item 3 quotes are sought, in accordance with the procurement
      policy.
5.    If 3 quotes are sought they are noted on a small purchase quote sheet and
      attached to the purchase order.
6.    Procurement officer fills out purchase requisition including prices.
7.    Procurement officer requests purchase order number from Finance.
8.    Purchase order number is assigned to purchase requisition and recorded in purchasing log.
      Totals are run on purchasing log weekly so that an up to date tally can be kept of
      purchases for the month.
9.    Purchase requisition is signed by Maintenance Director and Finance Director.
10.   Materials are ordered by Procurement Officer
11.   Copies are made of purchase requisitions and all supporting documentation, these are filed
      in an outstanding P.O. file.
12.   Originals are taken to Finance for processing.
13.   Finance sends copy of processed P.O. back to procurement, this copy is attached to
      supporting documentation and filed in outstanding file.
14.   When materials come in, stock person checks them in and brings receiving document to
      procurement. Procurement officer rechecks materials against purchase order and notes
      any back ordered items.
15.   Procurement officer makes copy of receiving document to attach to processed purchase
      order all documents are then moved to the completed file.
16.   Original receiving document goes to Finance to be attached to original purchase order.
17.   When an invoice is received for the purchase order, Finance checks the invoice against the
      original purchase order and notes and discrepancies.
18.   Original invoice and purchase order come to procurement,
19.   Procurement officer rechecks purchase order and receives materials in to computer,
20.   Procurement officer handles any discrepancies in shipping or pricing at the time the
      receiving is done. This is done by calling vendors.
21.   After any problems are straightened out and receiving is processed the receiver normally
      the procurement officer signs off.
22.   The entire packet, original invoice, original purchase order, requisition and all supporting
      documentation are taken to the Maintenance Director to be checked and signed by that
      Director.
23.   All originals are then taken back to Finance for payment.




                                            Page99                                 99-CH-202-1001
Appendix B


                      LARGE PURCHASES OR CONTRACTS
                               OVER $10,000


1.     Scope of work is decided on.
2.     Packet is put together being as specific as possible in listing what we expect from the
       contractor.
3.     Legal notice, "Invitation To Bid" is run in the newspaper two consecutive weeks, one day
       each week.
4.     Seven days after the legal ad is run packets are made available to the bidders.
5.     When picking up a packet bidders must sign a log sheet
6,     When sealed bids are received they are time and date stamped but not opened until the
       time and date specified.
7.     In the packet a date and time are specified for the opening of the bid all bidders are
       welcome to this opening. One or Two Springfield Metropolitan Housing Authority
       employees are also present. There must always be a witness to the bid opening, if no
       bidders are available at the opening an employee would be used as a witness.
8.     Bids are opened read and recorded on a bid log sheet.
9.     A low bid can be thrown out if contractor cannot meet the requirements specified in the
       packet.
10.    Requirements that must always be met are proof of insurance bond, workers comp., any
       required licenses. They cannot be on the debarred list. Items that will also be checked are
       availability, can they start by the start date and finish by the complete date.
11.    If only one bidder bids a cost and price analysis must be done to verify reasonableness of
       bid.
12.    Award will be made by written notice.




99-CH-202-1001                            Page100
                                                                           Appendix B


                      VENDOR PAYMENT PROCEDURE
                           ENHANCEMENTS



1.    Supporting documentation since December'97 is now reviewed by the
Finance Director prior to being forwarded to the Executive Director for check
issuance sign-off approval.

2.     Since January'98 Authority checks are signed by the Board Chairperson and
the Executive Director. Previously the Manager of Modernization had also
reviewed and approved check issuance sign-off and also was an authorized check
signer.

3.     Since January'98 Finance requires that check requests which do not have
purchase orders, etc. be approved for payment and evidenced by signing off by a
department head if under $1,000 and if over $1,000 be also approved by the
Executive Director, prior to payment check processing. The approval sign off
supports that the services or items were received and that the amount
to be paid is proper.

4. Since March'98 Vendor accounts payable statements are being investigated and
differences resolved by the Finance department.

5. Since April'98 a monthly summary of payments from the accounts payable
vendor payment file is produced and reviewed at the monthly SMHA Board
Meeting. This report includes descriptions of the reason for the expenditure.

6. Bank statement reconciliation responsibilities were reassigned to a
Finance employee who does not make up the deposits or collect rent.




                                       Page101                           99-CH-202-1001
Appendix B


                 SPRINGFIELD METROPOLITAN HOUSING AUTHORITY
                                437 E. John Street
                              Springfield, Ohio 45505
                                   513-325-7331
                                  FAX 325-3657
Dicer L. Oxner
Chairperson

Selma L. Mabra
Vice Chairperson

Courtney Metzger
Member

Robert Cherry
Member

Sheila Ballard      TO: Fred
Member                  Mary Ann
                        Sandy
                        Valerie
                        Rob
                        Rita
                        Jeanette
                        Stephanie
                        Terri
                        Janice



                    FROM: Dick Wright
                    RE: Computer Program for Maintenance-Leasing-Housing Management

                    DATE: January 10, 1996

                    You have been selected to become part of a task force which will
                    recommend a new comprehensive computer program dealing with all
                    aspects of the leasing, management, and maintenance cycle.

                    This group will meet on a regular basis on Thursday at 10:00 AM. The first
                    meeting will be at 10:15 tomorrow in the conference room. Please plan to
                    attend.

Section 8 Program                    Application Office                   Maintenance Office
    322-6180                            325-9248                              325-3020

99-CH-202-1001                          Page102
                                                                                       Appendix B


                           Response to Inspector General’s Finding

       "The Authority Used Modernization Grant Funds In An Inefficient Manner"

Prior to the hiring of the present executive director, the Comprehensive Grant Program was not
operated in a business like manner. Except for those items noted below, the finding is accurate.
Once the problems of the CGP were discovered, steps were taken to begin correcting the
problems, and tightening up the management of CGP.

The first problem discovered was that two CIAP grants and all the CGP grants dating back four
years were yet to be closed. When this process began it was discovered that funds had been
drawn down without documentation, funds drawn down for one purpose were used for another,
etc. It took a year of examining and searching to discover documents that would bring the
accounts into balance. After all this, it was discovered that SMHA has set up "deferred
accounts" where invoices and payments were placed and no action would be taken until later. To
correct this, it was necessary to research files and make account adjustments. This took another
several months to correct.

The two CIAP grants and CGP 701, 702, 703, 704 have been closed. CGP 705 will be closed
before the end of 1998. We are awaiting approval from HUD to begin implementing a revised
CGP grants 706 and a new CGP 707.

A few of the measures taken to restructure the CGP program are:

1. The position of CGP Coordinator is now under the supervision of the Director of Maintenance
and Modernization. Formerly it reported directly to the executive director but in reality was left
unsupervised.

2. The Finance Department has been given direction that no funds are to be drawn down from
HUD before all the supporting documentation is in the file.

3. The Finance Department has set up a process for drawing down funds soon after the debt is
documented. This prevents CGP from using public housing to cover CGP costs. A practice that
was in place earlier had SMHA paying CGP costs and then waiting to draw them down. This had
the effect of depleting the public housing reserves and caused a burden on the general financial
status of SMHA.

4. Internal controls have been established to prevent further occurrences of the problems.
1. The CGP process will follow the resource manual.
2. All entities who will be impacted are involved in the planning and will sign off on the plan
through their elected resident councils before it is submitted.
3. Management staff will facilitate the assessment of all relevant information.
4. The management team will evaluate all the pertinent data and establish a priority of needs.




                                              Page103                                99-CH-202-1001
Appendix B


5. Work items will be ranked based on urgency of need regardless of the development in which
they are located.
6. Management will provide adequate resources for administration, audit, design and inspection,
as well as overall management for the program.
7. CGP work will be monitored to assure that the work is progressing efficiently and effectively.
8. Federal funds will be managed properly and not used for fraudulent purposes.
9. All work items will be conducted in accordance with the CGP rules, the annual statement and
the five year action plan.
10. The SMHA procurement policy will be followed on all procurement activities.
11. A new procurement policy was adopted on January 20, 1998, and it is in accordance with the
latest HUD guidelines.

The recommendation that "The Authority should reimburse the Grant any costs that cannot be
supported to be reasonable and necessary, or are ineligible." Considering the status of the
Authority’s financial condition, it is unlikely SMHA has the necessary resources available to repay
these errors. Steps have been taken to correct the problems and future CGP funds will be used
properly. It is suggested that HUD not require repayment of the funds.




99-CH-202-1001                             Page104
                                                                                     Appendix B


                            Response to Inspector General Finding

   "The Authority Incorrectly Charged Costs To The Comprehensive Grant Program"

The Inspector General appears to be approaching the SMHA as a federation of all its programs,
not as an entity made up of all its programs. During the Congressional debate concerning the
Comprehensive Modernization Program, the issue of addressing the needs of the whole Public
Housing Authority was discussed. In HUD "Comprehensive Grant Program Guidebook October
1996," page 4-12, item 4-9 it states "As part of the Comprehensive Plan, the HA shall prepare
Form HUD-52833, Management Needs Assessment, identifying all improvements (including
those with no cost) needed to upgrade the management and operation of the HA --------."

Under section B. Mandatary Improvements. "The Management Needs Assessment shall identify
the most current needs related to the mandatory areas listed below--------.
1. The management, financial, and accounting control systems of the HA.

The National Association of Housing and Redevelopment Officials, a recognized HUD training
organization, has developed a manual for the Comprehensive Grant Program. On page 67 of the
manual, where it discusses the Management Improvements, it states, "The process should focus
on identifying all improvements, including those that can be accomplished at no cost, needed to
upgrade the management and operation of a PHA on an agency-wide basis and/or upgrade the
management and operation of each viable development --------."

In every instance the SMHA developed a HUD 52833, submitted it to HUD for approval, and
was allowed to fund the computer system and telephone system from Comprehensive Grant
funds. At no time did the HUD office inform SMHA that the costs must be shared with each
program entity.

Prior to the employment of the executive director the SMHA had made the decision to upgrade
the computer system. The initial estimates for the upgrade were not accurate, therefore the costs
accelerated as the project begun. The basic components of the computer system (hardware and
software) were necessary to support the Public Housing program, and would have been
purchased if only the Public Housing program were served. In order to address the accounting
functions, it was necessary to have software that interfaced with all SMHA programs, including
Section 8. The attached charts demonstrate the actual additional cost of adding Section 8 to the
computer system. All ongoing expenses for operating the system are being shared by the Section
8 program.

The same basic premiss will hold for the telephone system purchase. In order to upgrade Public
Housing it was necessary to upgrade all phones. The basic foundational items would have been
purchased even if the Section 8 program had not been included. The actual additional costs for
the Section 8 telephones is included in the attached charts.

The basic issue here is that HUD’s 7485.3 G Guidebook does not specifically address the
proration of costs for PHA wide management improvements. The only guidance is found in one

                                             Page105                               99-CH-202-1001
Appendix B


line of a regulation buried in thousands of pages of regulations. The SMHA did not violate this
specific line of a regulation purposely, but through ignorance.

The second basic issue, and the most critical issue if the SMHA will be required to pay Public
Housing from Section 8 funds, is the issue of how a proration of costs will be defined. The
Inspector General has used the unit count for deciding the SMHA owes HUD $65,836.00. The
SMHA wants to use the actual additional costs incurred for expanding the systems to the Section
8 department. Using this method the adjustment from Section 8 is $23,247.00

SMHA requests that the adjustments from Section 8 be waived due to the lack of funds in the
Section 8 accounts. The attached memo makes clear that future charges to the Comprehensive
Grant Program will be properly prorated.

Finally, in the Inspector General’s finding they quote "A Housing Authority employee told us that
physical and administrative improvement costs were charged to the comprehensive grant because
the Authority had always charged these costs to the grant. The Finance director who reviewed
and approved the charges assumed that charges were correct." Not identifying the Housing
Authority employee raises questions about their level of knowledge or understanding of the
program. The Finance Director is one of the last stops in the process of paying Comprehensive
Grant Program charges. When the payment request reaches his desk it will have been signed off
by the Director of Maintenance and Modernization, the Comprehensive Grant Coordinator, and
other line staff. When it reaches him there is information documenting the receipt of goods or
services, the actual costs for goods and services, and before funds can be drawn down, HUD must
approve the items by approving the Management Needs Assessment and the Physical Needs
Assessment by entering approval codes into the LOCCS system. The proration of costs has
always been done during the preparation of the Comprehensive Grant Program plan. This will be
modified per the attached memo.




99-CH-202-1001                             Page106
                                                                                      Appendix B


                                  INTEROFFICE MEMO



Date-. July 30, 1998

To-.   Janice Peterson

From: Bob Sheppard

Sub:    Comprehensive Grants

It has come to my attention that certain management improvement and or administrative expenses
charged to Comprehensive Grants that may need to be reassessed and potentially adjusted.

Specifically if administrative expenses benefit both public housing and non-public housing
such as section 8 then the cost charged to comprehensive grants must be prorated.

Please check and prepare adjustment detail and return to me for items charged to comprehensive
grants that should be evaluated for multiple benefit. Some items that might be included are:

        The Phone System Replacement(Sec.8 has 23% of the phone lines)
        Computer Systems Hardware
        Computer Systems Software

Also please check to see what salaries and benefits have been charged to the comprehensive
grants. Do we need to catch up billing for salaries and benefits for persons who work on the
comprehensive grants? (A portion of your time/salary, a portion of Mr. Brimmer's time/salary; all
of Mr. Wilson's time/salary, a portion of Ms. Dornon’s time/salary etc.). Please inform me of
your findings.

Are you aware of the percentage limitations on management improvement and administrative
expenses?

Secondly, I have heard that our prior year comprehensive grant balances reported to HUD may be
out of balance with our general ledger balances. I recall that Diane Boles had worked on
reconciling these balances with you and Rita. Please find and show me the reconcilement’s.

cc:    Rita Dornan
       Charles Brimmer




                                             Page107                                99-CH-202-1001
Appendix B


                           Response to Inspector General’s Finding

                   "The Authority Did Not Follow Travel Requirements"

The Housing Authority revised the travel policy in October 1996 because the policy in place at the
time did not cover the actual expenses of the traveler. The revised policy required documentation
for all expenses at the time of settlement. It was an interim policy which was to be revisited when
the newly revised personnel policy was discussed. The proposed language in the draft personnel
policy is as follows:

       "D. Meals will be reimbursed up to a maximum per diem without receipts as specified in
the Federal Register for other than Federal civilian employees. Recently issued Federal Travel
Regulation, General Guides and TDY Travel Allowances published April 1998 but effective
January 1, 1998, provides for the following per diem meal allowances:
                                      Low            In-Between           High
Breakfast                             $6                  $7               $9

Lunch                                 $6                   $7               $9

Dinner                                $16                  $18              $22

Incidentals                           $2                   $2               $2

Total per day:                        $30                  $34              $42

Breakfast is allowed for travel originating or ending 12:01 a.m. through 6:00 a.m.
Lunch is allowed for travel covering 6:01 a.m. through 12:00 noon.
Dinner is allowed for travel covering 12:01 p.m. through 6:00 p.m.

Meals include expenses for breakfast, lunch, and dinner and related tips and taxes(specifically
excluded are alcoholic beverage and entertainment expenses and any expense incurred for other
persons) If a meal is provided in a conference fee then appropriate meal allowance per above
will be excluded from the reimbursable per diem, unless the traveler can document they were
unable to attend to conference meal for good cause.

Incidental expenses include fees and tips given to porters, baggage carriers, bellhops and hotel
maids.

The traveler will endeavor to pay no more than the maximum Federal lodging amount based
upon the rates published in the current applicable Federal Register. The maximum Federal
lodging amount included taxes.

When traveling to a "high cost" location, the traveler may choose to be paid for those costs
exceeding the per diem allowance by providing receipts and other documentation to justify the
actual expenses."

99-CH-202-1001                              Page108
                                                                                      Appendix B


Recent changes in the processing of travel vouchers will provide more checks and balances. Now
the Director of Finance must review and sign off on all travel vouchers. Then the voucher will be
presented to the executive director for approval. It will then be returned to another person in
finance for processing and filing. Each step of this process should require review of the
documentation supporting the travel.

In regard to the specific amounts recommended be paid from non-HUD funds, the following is
accurate information from the accounts: (see attached detail)

All of the travel amount $2,750.00 reported to be owed by the commissioner is in error: The
records show that an adjustment to the accounts was made during July and September, 1996.
There are no balances owed in the accounts.

The former Maintenance Director did submit travel vouchers for the use of his own vehicle. All
the vouchers are in the file, and most have data which identifies why he was traveling. He did not
fill the information in on the lines identified for this information, and in some cases he lumped
things together. At the time his employment was terminated, this was one of the issues
management was trying to correct.

Finally, the out of town travel by the former Maintenance Director is generally correct. However,
The amount shown in the report differs from the Housing Authority Accounting records. They
show he owes $1,149.00. Since the former Maintenance Director is no longer an employee of the
Housing Authority it will be very difficult to recover this amount.




                                             Page109                                99-CH-202-1001
Appendix B


For the first advance, receipts excluding hotel of $174.32 were found on file. For the
third advance a cancellation fee (1 night) was turned in $76.34. Total receipts excluding
hotels which were direct pay totaled $250.66 and indicates a balance due of $1,149.34.
Our 9/30/97 general ledger books had indicated an advance due from the former
Maintenance Director of $1,400. As part of closing I will adjust it to $1,149.34.
Accordingly, I believe the $1,302 still owed to SNIH.-X should be $1,149.

Turpin's mileage reimbursements are summarized as follows:

Check #26380 2/13/97        $127.10       410 miles approved
      #26423 2/20/97          37.14       94 miles + Park $8 appr.
      #26562 3/13/97         382.85       1235 miles approved
      #26784 4/03/97         398.66       1286 miles approved
      #26883 4/15/97         186.93       603 miles approved
      #26959 4/24/97         179.24       176 miles approved

                  Total     $1,311.92


This agrees with the IG number of $1,312, however I do not understand
their comment regarding adequate documentation to support the specific sites that
he traveled to and the nature of Authority the business that he performed.




99-CH-202-1001                          Page110
                                                                                Appendix B


                          IG-Travel Draft Recommendation
            Back-ground Facts Researched by Bob Sheppard, Dir. of Finance
                                  August 27, 1998

Documentation For Travel Advances & Advances Not Settled

The $4,052 in travel advances not settled, I believe is comprised of the
following:
                                           Board member           $2,750
                                      Former employee              1,302
                                                     Total        $4,052

The board members amounts were settled by Dick Wright through journal entries JV
0948 to reclassify travel for account miscoded.                   $1,123.98
and JVO703 to adjust advance accounts                             $2,626.02
                                   Total                          $3,750.00

Accordingly, the general ledger shows no balance owing for the board member as of
9/30/96. Copies of his expense statements were not in our current files however
they may be in storage.

The former Maintenance Director general travel advances totaled $1,400 and
included 3 checks not the 4 checks for $1,500 mentioned by the IG auditors. The 3
advances were as follows:


                        Check #26423        2/20/97          $ 400.00
                               #27066       5/01/97          $ 600.00
                               #27075       5/13/97          $ 400.00
                                           Total             $1,400.00




                                           Page111                            99-CH-202-1001
Appendix B


                           Response to Inspector General’s Finding

             "The Authority could Not Support the Allocation of Indirect Costs"

Changes to the distribution of costs are as follows:

Allocation of Salaries and Wages

The director of finance drafted and obtained documentation that supported the current
distribution of actual activity by employee in April 1998. The attached sample copies of the
"Certification of Employee Work Percentages" was distributed to all departments, and every
position was reported. This provided a base distribution which will be updated peridically to
properly allocate salaries and wages.

Allocation of Indirect Administrative Costs

An allocation plan will be developed by the end of the calendar year for indirect costs, such as
utilities, equipment rental, office equipment, automobile expenses and office supplies. Employee
benefit expenses will be distributed based on employee wages and salaries.




99-CH-202-1001                                Page112
                                                                                             Appendix B

Date:    April 3, 1998

To:      Anita Perrin, Director of Operations

From:    Bob Sheppard, Jr., Finance Director

Sub:    Certification Of Employee Work Percentages
Period: October 1, 1997 Through March 31, 1998

To comply with federal HUD regulations (circular A-87) recently amended in 1997 it is necessary to have
supervisors or the employees sign semi-annual certifications that their work was 100% related to a specific
program (such as Sec. 8 or Public Housing). Our records indicate that the following employees are
working I 00% as follows:

PH Intake (Temp)                      Tihara Miler               Public Housing
PH Occupancy Coordinator              Michelle Lee               Public Housing
Occupancy Coordinator                 Valerie McKinley           Public Housing
Lead Sec.8-Hous.Coordinator            Lornia Jenkins            Sec. 8
Sec. 8-Admin.Hous. Specialist         Mary A.Hamilton            Sec. 8
Sec.8-Specialist I                     Sherry Fleming            Sec. 8
Sec. 8-Housing Inspector               William Murphy            Sec. 8
Sec.8-Housing Inspector                Barbara Seward            Sec. 8


Certification

I have examined/supervised the work of the above employees and certify that the
work allocation program percentages are accurate with the following exceptions



Supervisor Signature          Title                  Date




                                                 Page113                                   99-CH-202-1001
Appendix B

Date:     April 3, 1998

To:      Charles Brimmer, Director of Maintenance

From:    Bob Sheppard, Jr., Finance Director

Sub:     Certification Of Employee Work Percentages

Period: October 1, 1997 Through March 31, 1998

To comply with federal HUD regulations (circular A-87) recently amended in 1997 it is necessary to have
supervisors or the employees sign semi-annual certifications that their work was 100% related to a specific
program (such as Sec. 8 or Public Housing). Our records indicate that the following employees are
working 100% as follows:



PH Inspector                    Stephanie Kellum                 Public Housing
PH Technician(Temp)             Sue Jenkins                      Public Housing
Maintenance Foreman             Don Cochenour                    Public Housing
Main.Mechanic E                 Mike Brown                       Public Housing
Main.Technician E               Mike Bowshier                    Public Housing
Main.Technician E               James Carter                     Public Housing
Main.Technician E               Robert Edwards                   Public Housing
Main.Technician E               James McGee                      Public Housing
Main.Technician E               Ron Phillips                     Public Housing
Main. Technician E              George Plantz                    Public Housing
Main. Aide E                    Mike Randolph                    Public Housing
Main. Aide E                    Larry Rowland                    Public Housing
Main Aide E                     Clarence Williams                Public Housing
Main. Aide E                    Roger Trent                      Public Housing
Main.Aide A                     Josh Lickliter                   Public Housing
Main. Aide A                    Casey Smith                      Public Housing
Main.Aide B                     Leon Turner                      Public Housing


Certification

I have examined/supervised the work of the above employees and certify that the
work allocation program percentages are accurate with the following exceptions



Supervisor Signature                     Title                            Date




99-CH-202-1001                                   Page114
                                                                                             Appendix B

Date:   April 6, 1998

To:     Charles Brinuner, Director of Maintenance

From: Bob Sheppard, Jr., Finance Director     I

Sub:    Monthly Salary Allocation Reports For Employees who work on multiple activities

Period: Months eiided:Oct.'97, Nov.'97, Dec.'97, Jan.'98, Feb.'98 & Mar.'98

To comply with federal HLTD regulations (circular A-87) recently amended in 1907 it is necessary to have
the employees sign monthly personal activity reports or equivalent documentation which reflects an after
the fact distribution of the actual activity of each employee and accounts for the total activity for which
each employee is compensated.

Employees who qualify for multiple activities in your department include the following:

Modernization Coordinator         Walter Wilson
Maintenance Assistant             Rita Halbirt/Dornon
Supply Manager                    Connie Clements
Director of Maintenance           Charles Brimmer

Suggested but not final proposed forms are attached.

Please endeavor to have this completed this week or advise me when they will be
completed.



Certification

The attached sheets discloses a true and fair distribution of time worked on
indicated projects.


Employee's Signature                              Date




                                                  Page115                                  99-CH-202-1001
Appendix B


My percentages of time worked* were as follows for the month of


Public Hous. Sec.8 Mod.Grant    Drug Grant F.S.S. TBA Other(specify) Total




*Time worked excludes time off for holidays, sick time, vacation time and time not
worked.




99-CH-202-1001                            Page116
                                                                                        Appendix B


                            Response to Inspector General’s Finding

          "The Authority Needs to Improve Its Controls For Safeguarding Assets"

The following changes (many during the time the Inspector General was here) have been
implemented:

Rent Collection
      1. The former Receptionist was discharged after an investigation was initiated by the
           current executive director.
      2. A new Receptionist was hired and reports to the Finance Director.
      3. New procedures were initiated by the Finance Director which include:
           a. Mail is now opened by the executive assistant or designated backup under the
               supervision of the executive director.
           b. Copies of all checks, money orders, or other cash items is made and retained for
               audit purposes by the back-up to the executive assistant or receptionist.
           c. Pre-numbered receipts are either given to residents or mailed to residents for all
               receipts.
           d. The receptionist batch totals are compared with the duplicate receipt copies and
               tapes of the checks or money orders received.
           e. A person other than and distinct from the bookkeeper now collects rent payments
               at the elderly high-rises. This person is from another department than finance.
           f. Other finance department personnel prepare the bank deposit and balance to the
               receipt copies.
           g. The Springfield Police Department takes the deposits to the bank daily during rent
               collection time.
           h. Separate finance department personnel post receipts to the detail for resident
               receivable records.
           I. The finance director investigates all resident receivable queries.

Cash Disbursements

1. The process of reconciling the checking account has been moved to the Data Processing
Specialist.

2. The check signing plates are kept locked in the finance director’s office until the running of
authorized checks.

Payroll Time Sheets

The time sheets for the part-time security personnel are submitted by the officers, reviewed by the
bookkeeper, the finance director, and the executive director.




                                              Page117                                 99-CH-202-1001
Appendix B


Rent Receipts Deposits

1. The finance director has conducted finance staff meetings and re-emphasized the importance of
timely deposits.

2. An objective of timely deposits has been added to the bookkeeper’s quantitative job
responsibilities and will be used for performance evaluations.

3. The finance director has worked out a daily schedule of balancing of cash receipts by 11:00
a.m. by the receptionist, preparing the bank deposit and balancing by the bookkeeper by 1:30
p.m., and pick up by the police officers the same day.

Computer Backup Safeguards

Computer backup files are removed from the top of a computer and are now locked in fire
resistant files and a safe.

SMHA is in the process of changing all computer pass words. This will be completed by the end
of September. They will be changed semi-annually thereafter.

Inventory Controls

SMHA has established the following inventory controls:

       1. June 17, 1997, the Board adopted a disposition policy.
       2. January 20, 1998 the Board adopted a procurement policy.
       3. March, 1998 the 211 East John Street building was made available for storage of large
          items. Many of the items previously stored in garages were moved.
       4. Spring, 1998 the parts room was enclosed with a cage, and all personnel had to begin
          signing out parts and equipment.
       5. August, 1998 the executive director stopped the practice of employees taking
          equipment for personal use.
       6. A general inventory of all items on the inventory list was conducted in the Spring,
          1998. The list is now up to date, and new items are being added as they are
          purchased.
       7. One person is now in charge of procurement, with the finance department monitoring
          the documentation for payment of items purchased.
       8. There is a person identified for parts and equipment supplies. She has been trained
          and is responsible for over sight of the distribution of parts and equipment.




99-CH-202-1001                             Page118
                                                                                    Appendix B



Secretary's Representative, Midwest
State Coordinator, Ohio State Office (2)
Director Public Housing Hub, Cleveland Area Office (2)
Director of Field Accounting, Midwest
Deputy Secretary, SD (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)
Counselor to the Secretary, S (Room 10234)
Senior Advisor to the Secretary for Communications and Policy, S (Room 10222)
Field Comptroller, Midwest
Assistant General Counsel, Midwest
Assistant to the Deputy Secretary for Field Management, SDF (Room 7106)
Director of Administrative Service Center, New York State Office
Assistant Secretary for Public and Indian Housing, P (Room 4100)
Comptroller/Audit Liaison Officer for Public and Indian Housing, PF (Room 5156) (3)
Assistant Secretary for Community Planning and Development, D (Room 7100)
Assistant to the Secretary for Labor Relations, (Acting), SL (Room 7118)
Acquisitions Librarian, Library, AS (Room 8141)
Chief Financial Officer, F (Room 10164) (2)
Deputy Chief Financial Officer for Finance, FF (Room 10164) (2)
General Counsel, C (Room 10214)
Associate General Counsel, Office of Assisted Housing and Community Development,
  CD (Room 8162)
Director, Housing and Community Development Issue Area, U.S. GAO, 441 G Street N.W.,
  Room 2474, Washington DC 20548
The Honorable John Glenn, Ranking Member, Committee on Governmental Affairs,
  United States Senate, Washington DC 20515-4305
The Honorable Fred Thompson, Chairman, Committee on Governmental Affairs,
  United States Senate, Washington DC 20515-4305
The Honorable Dan Burton, Chairman, Committee on Government Reform and Oversight,
  United States House of Representatives, Washington DC 20515-6143
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
The Honorable David L. Hobson, United States House of Representatives, 1507 Longworth
  House Office Building, Fifth Floor, Washington DC 20515
Executive Director, Springfield Metropolitan Housing Authority
Chairman of the Board of Commissioners, Springfield Metropolitan Housing Authority




                                            Page119                               99-CH-202-1001