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
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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
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)