Audit Report
District Inspector General for Audit
New York/New Jersey District
Report: 99-NY-209-1001 Issued: October 27, 1998
TO: Joan Spilman, Director, Office of Public Housing, 2CPH
FROM: Alexander C. Malloy, District Inspector General for Audit, 2AGA
SUBJECT: Buffalo Municipal Housing Authority
Public Housing Drug Elimination Program
Buffalo, New York
We conducted an audit of the Buffalo Municipal Housing Authority’s (BMHA) Public
Housing Drug Elimination Program (PHDEP). The overall objective of the audit was to
determine whether the BMHA provided adequate accountability over PHDEP funds
expended, and whether reported expenditures were reasonable and eligible.
Our audit disclosed that the BMHA has not established adequate controls to properly account
for funds expended under its PHDEP. It also disclosed that all reported expenditures were
not reasonable or eligible. Specifically, we found that the BMHA charged its Fiscal Year
(FY) 1995 and 1996 PHDEP grants with ineligible and questionable salary costs and with
drug prevention costs that were not reasonable, necessary or justified. We further found that
the BMHA did not have adequate controls over executed contracts. Additionally, the BMHA
has not developed a process to properly monitor and evaluate activities carried out under its
PHDEP. In view of the deficiencies discussed in this report, the BMHA must take corrective
actions to assure that future funds of its PHDEP are properly controlled, accounted for, and
used only for eligible activities in an economical and effective manner.
Within 60 days, please provide us a status report on : (1) the corrective action taken; (2) the
proposed corrective action and date to be completed; or (3) why action is not considered
necessary. Also, please furnish us copies of any correspondence or directives issued related to
this audit.
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If you have any questions, please contact Alexander C. Malloy, District Inspector General for
Audit at (212) 264-8000 extension 3976.
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Executive Summary
We conducted an audit of the Buffalo Municipal Housing Authority (herein
referred to as the BMHA) management of its Public Housing Drug Elimination
Program (PHDEP). The BMHA was awarded $4,898,050 in PHDEP funds for
Fiscal Years (FY) 1994 through 1996. The purpose of our audit was to determine
whether the BMHA provided adequate accountability over PHDEP funds
expended, and whether reported expenditures were reasonable and eligible.
Our audit disclosed that the BMHA did not always comply with program
requirements and regulations pertaining to the accountability of PHDEP funds
expended. The noncompliances were generally caused by inadequate controls,
which led to ineligible and unsupported use of PHDEP funds as discussed in the
findings.
1. Controls over the Accountability of PHDEP Funds Expended Were
Not Adequate
The BMHA has not establish adequate accountability controls over its
PHDEP expenditures. We found that the BMHA charged its FY 1995 and
1996 PHDEP grants with questionable salary costs and with drug
prevention costs that were not reasonable, necessary or justified. We also
found that the BMHA did not have adequate controls over executed
contracts. As a result, the BMHA is unable to assure HUD that all
charges to its PHDEP are reasonable, eligible, and represent an effective
use of limited Federal funds. We believe that these weaknesses occurred in
the BMHA’s controls over its PHDEP grants because the BMHA has not
establish effective budgetary and accounting controls for the program. In
view of the deficiencies discussed in this report, the BMHA must take
corrective actions to assure that future funds of the PHDEP are properly
controlled, accounted for, and used only for eligible activities in an
economical and effective manner.
2. The BMHA Did Not Established Adequate Procedures to Monitor
and Evaluate Activities of its PHDEP
The BMHA has not developed an adequate process to properly monitor
and evaluate activities carried out under its PHDEP. Specifically, the
BMHA did not: (1) submit completed outcome monitoring and semi-
annual performance reports; and (2) establish a system to obtain drug
related crime statistics. We believe these deficiencies occurred because the
BMHA did not establish procedures and clear lines of responsibility to
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ensure that grant requirements were met. Consequently, the BMHA cannot
provide adequate assurance that its PHDEP has made satisfactory progress
towards meeting its drug elimination goals.
As part of each finding, we have recommended certain actions which we believe
will correct the problems discussed in the findings and strengthen the BMHA’s
administration of its PHDEP.
The results of the audit were discussed with BMHA officials during the course of
the audit and at an exit conference held on July 21, 1998. The exit conference was
attended by:
BMHA Officials
Sharon West, Executive Director
Cheryl MacMillan, Director of Finance
Vincent Barrile, Principal Accountant
Ron Christopher, Chief, Public Safety
Mary Margaret O’Donnell, Director, Family Supportive Services
Carol Wilhelm, Grant Coordinator
Richard P. O’Donnell, Senior Auditor
HUD- Office of Inspector General (OIG)
Alexander C. Malloy, District Inspector General for Audit
Garry D. Clugston, Senior Auditor
Patrick C. Anthony, Auditor
Nancy Condren, Auditor
The BMHA agreed with some of the deficiencies reported in the findings and
disagreed with others. The BMHA’s written comments are included as Appendix
B to this report. As appropriate, we summarized and provided portions of the
BMHA’s comments and our evaluation of those comments after each finding.
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Table of Contents
Management Memorandum ..................................................................i
Executive Summary............................................................................iii
Table of Contents ................................................................................v
Introduction.........................................................................................1
Findings and Recommendations
1. The BMHA Did Not Provide Adequate Accountability Over
PHDEP Expenditures ...........................................................3
2. The BMHA Has Not Established Adequate Procedures to
Monitor and Evaluate Activities of its PHDEP....................17
Internal Controls................................................................................21
Appendices
A. Schedule of Ineligible and Questionable
Salary Costs .......................................................................22
B. Schedule of Ineligible and Unsupported Costs....................23
C. Auditee Comments .............................................................24
D. Distribution ........................................................................30
Abbreviations:
HUD Department of Housing and Urban Development
BMHA Buffalo Municipal Housing Authority
PHDEP Public Housing Drug Elimination Program
FY Fiscal Year
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Introduction
The Buffalo Municipal Housing Authority (BMHA) was established in 1934 to
provide decent, safe and sanitary housing for eligible low and moderate income
families in the City of Buffalo. Currently, the BMHA administers 25 federally
funded projects, with 4,660 public housing units, and 2 active state funded
projects, containing 697 units.
Governing body
The BMHA is governed by a Board of Commissioners (the Board) composed of
seven members; five are appointed by the Mayor and two are elected by the tenant
population. The Chairperson of the Board is Modesto Candelario. Sharon West,
who was appointed by the Board, is the Executive Director. The BMHA Offices
are located at 300 Perry Street, Buffalo, New York.
PHDEP grant funds
The BMHA was awarded $4,898,050 in Public Housing Drug Elimination
Program (PHDEP) funds for FYs 1994 through 1997. At March 5, 1998, the
BMHA had drawn down for expenditures $2,930,268 from the U.S. Department
of Housing and Urban Development (HUD).
FY PHDEP Grant Funds Awarded Funds Drawn down Balance Available
1994 $1,247,000 $1,247,000 $ -0-
1995 1,244,000 1,168,112 75,888
1996 1,190,250 493,922 696,328
1997 1,216,800 21,234 1,195,566
Total $4,898,050 $2,930,268 $1,967,782
Audit objectives
The general audit objectives were to determine whether the BMHA provided adequate
accountability over PHDEP funds expended, and whether the PHDEP expenditures were
reasonable and eligible. The specific audit objectives were to determine whether the BMHA:
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• Established an auditable system that provides adequate accountability for awarded PHDEP
funds.
• Maintained records which adequately identify the source and application of PHDEP funds.
• Carried out its drug elimination activities as described in its HUD approved PHDEP
application.
• Established an effective system of internal controls.
• Established controls to assure that activities funded under the PHDEP were not also funded
under other programs.
Audit Scope and Methodology
We reviewed PHDEP grant applications, grant agreements, and financial records at both the
HUD Buffalo Area Office and the BMHA. Audit tests included comparisons of BMHA financial
records with HUD approved PHDEP budgets to determine if costs were in accordance with
agreements. Also, we tested costs for eligibility and support. We interviewed staff members of
HUD’s Buffalo Area Office, Office of Public Housing, and of the BMHA.
Our audit focused on costs charged against the FY 1995 and 1996 PHDEP grants.
We performed our audit field work from March 1997 through May 1997. The audit covered the
period October 1, 1994, through December 31, 1997. The audit period was expanded to cover
other periods as necessary.
We conducted our audit in accordance with generally accepted government auditing standards.
A copy of this report was provided to the BMHA.
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Findings
Finding 1
The BMHA Did Not Provide Adequate
Accountability Over PHDEP Expenditures
The Buffalo Municipal Housing Authority (BMHA) failed to provide adequate
accountability over its Public Housing Drug Elimination Program (PHDEP)
expenditures. We found that the BMHA charged its Fiscal Year (FY) 1995 and
1996 PHDEP grants with ineligible and questionable salary costs and with drug
prevention costs that were not reasonable, necessary or justified. We also found
that the BMHA did not have adequate controls over executed contracts. As a
result, the BMHA is unable to assure HUD that all charges to its PHDEP program
are reasonable, eligible, and represent an effective use of limited Federal funds. We
believe weaknesses occurred in the BMHA’s controls over the PHDEP funds and
expenditures because the BMHA has not establish effective budgetary and
accounting controls for the program. In view of the deficiencies discussed in this
report, the BMHA must take corrective actions to assure that any future funds of
its PHDEP are properly controlled, accounted for, and used only for eligible
activities in an economical and effective manner.
CFR 85.20(b)(2) provides that grantees must maintain records which adequately
identify the source and application of funds provided for financially assisted
activities. These records must contain information pertaining to the grant or
subgrant awards and authorizations, obligations, unobligated balances, assets,
outlays or expenditures and income. The BMHA’s system for recording the
PHDEP financial transactions in its General Ledger does not provide for a break
down of costs by line item for reporting purposes. It also does not record
obligated and unobligated amounts and balances. Although the BMHA maintains
subsidiary records for the PHDEP that provide a breakdown of expenditures by
line item, the records do not provide budgetary amounts by activity or obligated
and unobligated amounts. In conducting our review of reported PHDEP
expenditures, we used the BMHA’s subsidiary records as of December 31, 1997.
The review disclosed that the BMHA:
• Charged ineligible and questionable salary and fringe benefits costs to its
PHDEP.
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• Charged costs to the PHDEP’s Drug Prevention line item that: (a) were for
activities that were not approved, (b) were not in compliance with NOFA
requirements, (c) were incurred after grant termination dates, and (d) lacked
adequate supporting documentation.
• Failed to establish adequate controls over executed contracts.
The above issues are further explained in the following two subsections:
1. INELIGIBLE AND QUESTIONABLE SALARY COSTS
Our review disclosed that the BMHA charged its PHDEP salary and fringe benefit
costs of $437,981.62, representing $200,538.35 in FY 1995 and $237,443.27 in
FY 1996, that were either ineligible or questionable. During the review, we
classified those costs in to four categories: (a) salary costs for unapproved
positions, (b) salary costs for individuals not performing PHDEP related work, (c)
salary costs to supplant existing BMHA positions, and (d) salary costs for
positions with questionable approval. The ineligible and questionable salary and
fringe benefit costs are shown on Appendix A of this report and discussed in
detail below:
a. Salary costs for unapproved positions
A total of $17,261.77 was charged to the FY 1995 PHDEP as salary and fringe
benefit costs for three positions that were not included in the PHDEP application.
These positions were: 1) Senior Accountant, 2) Statistical Clerk, and 3) Case
Manager.
According to the FY 1995 NOFA dated January 5, 1995, “All grant personnel
must be necessary, reasonable and justified. Job descriptions must be provided for
all grant personnel. “Excessive staffing is not permitted.” We considered the
positions listed above, excessive staffing since they were not approved in the grant
application. Accordingly, their costs, which totalled $17,261.77, are considered
ineligible.
b. Salary costs for individuals not performing PHDEP related work
The BMHA charged salary and fringe benefit costs totaling $26,308.41 to its
PHDEP for three typists who were not responsible for performing PHDEP related
work. Cost of $22,320.03 was charged to the FY 1995 PHDEP, while the
balance of $3,988.38 was charged to the FY 1996 program. Actually, one typist
was the Receptionist for the BMHA’s Executive Department. The other two
typist also worked in the BMHA’s Executive Department but did not have any
PHDEP related responsibilities.
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The FY 1995 and 1996 NOFAs’ state: “Grant funds must be used only for Drug
Elimination Program purposes. Direct costs are those that can be identified
specifically with a particular activity or function in the NOFA and cost objectives
in OMB Circular A-87. Indirect cost are not permitted in this program.” “ PHA
staff shall be compensated with grant funds only for work performed directly for
PHDEP related activities and shall document the time and activity involved in
accordance with CFR 85.20.” Since the duties and responsibilities of the typists
previously discussed were not directly related to PHDEP activities, their associated
salary and fringe benefit costs would not be an eligible PHDEP cost. Thus, the
salary and benefit costs, which totalled $26,308.41, that the BMHA charged to
PHDEP for typists who did not have any PHDEP-related responsibilities are
ineligible for inclusion in the costs of its PHDEP.
c. Salary costs to supplant existing BMHA positions
We identified $232,257.51 in salary and fringe benefit costs that the BMHA
charged to the PHDEP for BMHA employees whose positions were in existence
before the FY 1995 PHDEP grant was awarded. These positions were: Tenant
Relations Aide, Case Manager, Tenant Relations Specialist, and the Deputy
Director of Family Support Services. In connection with this issue we noted that
the BMHA formed a Family Support Services Department and transferred those
positions to that Department. However, the position descriptions and job
functions of those employees did not change. For instance, we obtained the job
specification for the Tenant Relations Specialist and noted that the last time it was
updated was approximately two years before our audit period and before the
Family Support Services Department was formed. In other words, the job
responsibilities did not change, which resulted in PHDEP funds being used to
supplant the existing position. The FY 1995, and 1996, NOFAs’ state: “Grant
funds shall not be used to supplant existing position or programs”. Therefore,
salary and fringe benefit costs of $6,902.17 for FY 1995 and $225,355.34 for FY
1996 are considered ineligible PHDEP costs; and as such, should be removed
from that program’s costs.
d. Salary costs charged for positions with questionable approval
We identified $154,054.38 in costs that were charged to the FY 1995 PHDEP, and
$8,099.55 charged to the FY 1996 program for salary and fringe benefit costs of
questionable positions, pursuant to the FY 95 and 96 NOFAs. In its FY 1996
application, the BMHA proposed, under the Employment of Housing Authority
Police Officers, to maintain seven civilian clerical positions (clerk Aides) to staff
three substations. This activity was approved by HUD; however, there was no
mention of clerk aides in the FY 1995 application. The FY 1996 NOFA, under the
eligibility of employment of security personnel, provides that the employment of
additional housing authority police officers (emphasis added) is permitted only by
housing authorities that already have their own housing authority police
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departments. The NOFA did not allow for the hiring of civilian clerk aides. We
were advised by a member of the BMHA staff that the clerk aides were BMHA
residents and that they were hired to work at the Housing Authority Police
Department. During the review we were informed that the Grant Coordinator
believed that the BMHA requested and obtained HUD approval to charge the
salary and fringe benefit costs of the clerk aides to its FY 1995 PHDEP. However,
the BMHA was unable to provide any documentation showing that HUD provided
the approval. Because it is questionable whether salary and fringe benefit costs of
$162,153.93 should have been charged to BMHA’s FY 95 and 96 PHDEP for
clerk aides, we are considering those cost questionable and/or unsupported
pending an eligibility determination by HUD.
2. QUESTIONABLE DRUG PREVENTION COSTS
a. Costs charged for unapproved activities.
The FY 1995 NOFA, dated January 5, 1995, provides that grantees are required to
use grant funds under this program in accordance with this NOFA, 24 CFR part
961, 24 CFR part 85, 24 CFR part 84, applicable statutes, HUD regulations,
Notices, Handbooks, OMB circular, grant agreements/amendments, approved
plan, budgets (SF -424A), budget narratives and timetables. The NOFA also
require applicant’s plans to clearly describe the activities that are being proposed.
The FY 1995 PHDEP grant provided for $686,270 under the Drug Prevention
line item and specifically identified the activities to be funded. However, we noted
that BMHA incurred contract costs of $57,652 for three activities that were not
included in the grant application, which are shown below:
Amount
Amount per Contract Paid per
Activity Application Amount Vouchers
Resident training for Painting $0 $21,835 $21,835
Mural Painting 0 16,554 13,049
Employment Center 0 25,000 22,768
TOTAL $0 $63,389 $57,652
Since the activities in the above table were not included in the approved
application, we considered their associated costs of $57,652 questionable and
unsupported pending a eligibility determination by HUD.
In addition to the above, we noted that for eight approved activities the BMHA
executed contracts and charged the grant costs in excess of the amounts
budgeted for those activities. As shown below, costs totaling $220,858 were
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charged to the FY 1995 grant under those activities, which was $104,858 in excess
of the $116,000 budgeted for the activities per the application.
Amounts per Costs Per Excess
Activities Application Vouchers Costs
Job Training 1996 &
1997 $ 40,000 $ 81,627 $ 41,627
Be-A-Friend Program 20,000 30,000 10,000
Learn to sew - youth 10,000 27,000 17,000
Learn to sew - adults 10,000 24,017 14,017
Gardening course 1,000 1,175 175
Girl Scout Programs 20,000 23,265 3,265
Summer Track and Field 8,000 24,785 16,785
Summer Day Camp 7,000 8,989 1,989
TOTALS $116,000 $220,858 $104,858
Regarding the excess costs, the Grant agreement provides that the grantee shall
not make or cause to be made any changes to the services without the express
written consent of HUD. In our opinion, the noted excess costs represent
changes in the services provided. Based on costs incurred, we believe that the
BMHA made substantial changes to activities approved under line items of its FY
1995 PHDEP. In this regard, the BMHA should have obtained HUD’s approval
as required by the Grant agreement. Therefore, we considered the excess costs,
which total $104,858, questionable and/or unsupported pending an eligibility
determination by HUD.
Because the BMHA incurred costs for unapproved activities and exceeded the
amounts budgeted for other activities, many activities listed in its FY 1995
PHDEP grant application were not funded and accordingly not accomplished. We
believe these deficiencies are attributable to the BMHA’s failure to record
expenditures on its accounting records by approved activities and to a lack of
communication among the various departments responsible for budgetary controls
over PHDEP funds.
b. Activities lack documentation to support compliance with NOFA
requirements
Our review disclosed that several of the activities funded under the Drug
Prevention Program lacked adequate documentation; thus, prohibiting a
determination as to whether they met the requirements of the NOFA. The FY 95
NOFA, dated January 5, 1995, provides, under the Drug Prevention Program, that
Youth Services Activities must provide for: (1) the dissemination of drug
education information, (2) the development of peer leadership skills, and (3) other
drug prevention activities. The NOFA further provides that for Economic and
Educational Opportunities for Residents and Youth, the program must
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demonstrate the ability to provide residents with the opportunity to interact with
private sector businesses to develop or build skills necessary for pursuing
educational, vocational, and economical goals.
Our review disclosed that contracts pertaining to activities related to economic and
educational opportunities did not contain a provision requiring the contractors to
meet NOFA requirements. In this regard, we noted that the BMHA files for the
two summer employment activities, the learn to sew program, and the gardening
course for residents and friends, did not contain documentation showing that the
activities had met the requirements of the NOFA. Also, the mural painting
instructions for the children youth services activity did not have any
documentation supporting that the required dissemination of drug education
information was done. As a result, we could not determine whether these activities
met NOFA requirements.
c. Expenditures Incurred Subsequent to the Grant Termination Date
Section II(e) of the FY 1994 NOFA, dated April 1, 1994, provides that any funds
not expended at the end of the grant term shall be remitted to HUD.
We determined that the BMHA had drawn down and expended $141,468.15 in
FY 1994 PHDEP grant funds subsequent to the extended termination date of the
grant. In this regard, we noted that the FY 1994 PHDEP grant’s termination date
of January 11, 1997 was extended to June 10, 1997. We also noted that
subsequent to the extended termination date, the BMHA submitted eight draw
down requests for PHDEP funds. The requests for payments were submitted
between June 12, 1997 and October 21, 1997 making the last one 141 days after
the grant termination date. Many of the purchase orders and invoices supporting
the requests for payments were dated after June 10 1997, indicating that the costs
were also incurred after the grant termination date. A BMHA staff member told us
that members of the BMHA believed that the draw downs were allowable since the
HUD Buffalo Area Office reviewed and approved them. We were advised by the
approving officials in the HUD Buffalo Area Office that the requests for payments
were approved because it was his understanding that a PHA could submit requests
for payments up to 90 days after the termination date. When asked about the four
requests that were submitted more that 90 days after the termination dated, the
official replied that those payments were verbally approved by a supervisor. A total
of $141,468.15 in FY 1994 PHDEP funds were drawn down and expended
subsequent to the termination date in violation of the FY 1994 NOFA.
Consequently, the costs, which totaled $141,468.15, are considered questionable
and/or unsupported until a determination has been made by HUD as to whether
the BMHA will be allowed to keep the funds drawn down subsequent to the
termination date of its FY 1994 PHDEP.
d. Costs lacked adequate supporting documentation
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CFR 24 Section 85.20(b)(6) provides that accounting records must be supported
by such source documentation as canceled checks, payrolls, time and attendance
records, contracts and subgrant award documents, etc.
Our limited review of PHDEP expenditure disclosed six payments to various
contractors/subgrantees that lacked adequate documentation to support the entire
payment. In some cases, salary costs were only supported by time sheets, and in
other cases, salary costs claimed exceeded the amount supported by payrolls. Also,
we found that the amounts on invoices did not agree with the total amount
claimed, that certain charges were only supported by a ledger page while others
were not supported with documentation. Due to the lack of adequate supporting
documentation, a determination as to the necessity, reasonableness, or justification
of the certain costs could not be made, as discussed in various sections of this
finding.
3. LACK OF EFFECTIVE CONTROLS OVER EXECUTED CONTRACTS
Our review of contract costs charged to the PHDEP grants disclosed several
weaknesses in the BMHA’s controls over executed contracts. Specifically, we
found that the BMHA did not adequately maintain a contract control log, that
statements of work lacked adequate details, and that contracts were executed after
the service period had started. We believe these deficiencies are attributed to the
BMHA’s lack of adequate procedures to ensure that contracts are properly
written, executed, and monitored for contract performance. As a result, controls
necessary for the BMHA to obtain adequate assurance that performance by
contractors were acceptable and that services agreed upon were effectively
delivered were not adequate.
a. Contract control logs were not adequately maintained
Contract control logs for the PHDEP grants are kept by the Grant Coordinator
instead of the BMHA’s accounting Department. Our review disclosed that
contract control logs were not adequately maintained. In two cases, the contracts
were not included on a contract log; the entire amount, for contracts with
multiyear funding, was only listed on the FY 1995 PHDEP contract log; and two
separate contracts with the same entity were combined as one on the contract log.
Furthermore, the grant year to be charged was not identified in the contract. As a
result, the PHDEP contract log did not provide adequate administrative controls
over executed contracts with contractors, nor for an adequate audit trail for
tracking procurement activities.
b. Statement of work lack adequate details
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HUD Handbook HM 7460.8 Rev 1, Procurement Handbook for Public Housing
Agencies and Indian Housing Authorities, Paragraph 7-3C provides that at a
minimum every Statement of Work should give a precise statement of objectives;
identify the work to be performed; and set parameters by which desired scope of
work can be defined and by which progress and results can be measured. We found
that the scope of services in several contracts was vague and lacked adequate
details. For example, the contract for the summer youth employment program
called for the non-profit to provide screening and placement of youth, as well as
for the administration of the payroll. However, the statement of work did not
provide sufficient details as to the exact duties and responsibilities the non-profit
was to provide. As a result, the performance of the contractor could not be
adequately monitored or evaluated.
c. Contracts executed after the service period had started
Our review disclosed that the BMHA executed nine contracts after the
contractor’s period of services had begun. For example, the contract with the
City of Buffalo’s Division of Substance Abuse Service (DSAS) was dated January
8, 1998, covering the period from July, 12, 1997 to December 31, 1997. As can
be determined, the contract period was over when the contract was executed. A
BMHA staff member indicated that the contract was not executed promptly due
to problems over the contract terms. However, we attribute the deficiencies to the
BMHA’s failure to negotiate and execute the contracts in a timely manner. As a
result, the BMHA weakened its control over and monitoring of the contract
services that were provided.
d. Terms of a Contract allowed unreasonable administrative fees to be
charged
The BMHA executed two contracts with non-profit organization to administer the
summer employment activities approved under the Drug Prevention activities of
its PHDEP. According to the contract, a non-profit organization was to
administer the employment of 80 BMHA youths during the summer of 1996, and
60 during 1997. The administrative costs were $6,136 in 1996 and 15 percent of
the contract ($11,190) in 1997. The BMHA paid the total amount of the
administrative fees even though the non-profit did not meet the goals set in the
contract, since only 42 youths were employed each summer. In our opinion, it was
not reasonable for the BMHA to pay the total administrative fees to the non-profit,
inasmuch as the required objectives were not met. In our opinion, the BMHA
should have included a provision in the contracts requiring administrative fees to
be prorated based on performance, such as the number of BMHA youths actually
employed. Because this was not done, the BMHA may have paid an excessive
amount for administrative services.
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The PHDEP grant agreement and regulations require proper accounting and
internal controls over all grant activities. The deficiencies discussed in this finding
occurred as a result of BMHA’s failure to establish and maintain adequate
controls and procedures for assuring that PHDEP funds are properly budgeted and
controlled, and used only for eligible and approved activities in an economical and
effective manner.
1. Ineligible and Questionable Salary Costs
Auditee Comments
a. Salary Costs for Unapproved Positions
The BMHA officials contend that the BMHA is required to follow the job specs of
the Buffalo Civil Service Commission, and that it would be unreasonable to expect
the Civil Service Commission to administer separate test for each agency for
basically the same title. BMHA officials further contend that it would be
unreasonable to expect the BMHA to allocate a portion of all the staff time to
various grants and funds. Considering all of the programs funded through the
PHDEP grants, the BMHA officials find it difficult to understand why the Case
Manager and the other two positions are not justifiable. BMHA officials advised
that if the authority were to wait for written approvals on each item presented to
HUD, it may as well turn over half the grant.
OIG Evaluation of Auditee Comments
Our concern is that the positions questioned in part 1a of the finding were not
listed in the grant application and were not approved. The applicable NOFA
clearly require that all grant personnel must be necessary, reasonable, and
justified. Since the positions discussed in the referenced part of the finding were
not approved, we considered them to be unnecessary. We also considered their
associated salary and fringe benefit costs of $17,261.77 to be ineligible charges to
the PHDEP.
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Auditee Comments
b. Salary costs for individuals not performing PHDEP grant-related work.
BMHA officials contend that they find it difficult to believe that none of the typists
in the Executive Department ever typed or filed or tracked down PHDEP
information at all. They also contend that for the timeframes involved, the Grant
coordinator reported to the Executive, and that time allocation is a problem. “A
BMHA official stated it not reasonable to charge the grants a portion of their
salaries.”
OIG Evaluation of Auditee Comments
The applicable NOFA does not allow for indirect cost to be charge to the Drug
Elimination Program. PHA staff shall be compensated with grant funds for work
performed directly on PHDEP related activities and shall document the time and
activities involved. Since the duties and responsibilities of the typists are not
directly related to the PHDEP activities and are not documented, their salaries and
fringe benefits are not allowable PHDEP costs.
Auditee Comments
c. Salary costs to supplant existing BMHA positions
The BMHA contends that it was the Civil Service Commission’s domain, and that
they are the ones who update and change jobs, not the BMHA. The BMHA
response indicated that the Grant Coordinator received verbal approval from HUD
to fund the positions we questioned as being in existence prior to the award of the
PHDEP grant. Also, that the Deputy Director of Family Support Services and the
Tenant Relations Aides were newly created positions and their job functions were
change because the staff had not previously been involved in program
development, monitoring or evaluation.
OIG Evaluation of Auditee Comments
Our review disclosed that prior to the PHDEP certain positions, which are
provided in the finding, existed. It also disclosed that the functions of those
positions have not changed. The applicable NOFA provides that grant funds shall
not be used to supplant existing positions. Thus, salary costs of $232,257.51,
which we believe were incurred to supplant existing BMHA positions, are not
allowable PHDEP costs.
Auditee Comments
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d. Salary costs charged for positions with questionable approval.
The BMHA contends that clerk aide positions were approved by the local HUD
office. The Grant coordinator did receive approval to fund these positions through
the PHDEP grant. The Grantee provided a copy of a letter to the CPD Director
asking for an extension and explaining why there was a delay in filling the
positions. The BMHA contends that the positions were never disapproved.
OIG Evaluation of Auditee Comments
We agree with the BMHA that the clerk aides positions were approved in the 1996
PHDEP grant. However, of the total charges of $162,153.93, $154,054.38 were
charged to the FY 1995 grant that did not mention clerk aide positions. Although
the FY 1996 NOFA allowed for the employment of additional housing authority
police officers, it did not allow for the hiring of civilian clerk aides. The letter
provided by the Grantee does not support that approval for clerk aides positions
for the FY 1995 PHDEP was obtained. Therefore, the costs pertain to the Clerk
aides position are considered questionable pending an eligibility determination by
officials of the HUD Buffalo Area Office.
2. QUESTIONABLE DRUG PREVENTION COSTS
Auditee Comments
a. Costs Charged for unapproved activities
The BMHA staff contends that they were informed at a HUD seminar that a 10
percent revision rule was appropriate. Further, they contends that contract costs
exceeding budgeted amounts should be expected since amounts in proposal and
applications are estimates. Since the BMHA cannot obligate funds that have not
been approved, it does not procure services until after HUD approval is received.
OIG Evaluation of Auditee Comments
The program changes discussed in this finding exceeded 10 percent in total and
are considered substantial plan changes that should have been approved by HUD.
The BMHA did not provide us with any documentation showing that plan
changes had been submitted and/or approved by HUD.
Auditee Comments
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b. Activities lack documentation to support compliance with NOFA
requirements
The BMHA contends that these programs were approved programs.
OIG Evaluation of Auditee Comments
The BMHA was unable to provide us with adequate documentation supporting
that activities met the applicable NOFA requirements.
Auditee Comments
c. Expenditures Incurred Subsequent to Grant Termination Date.
Officials of BMHA believe it is unreasonable to require the BMHA to draw down
funds for all expenditures incurred by the expiration date of a grant. Further, the
BMHA contends that page 10 of the Grant Agreement under Article VI, Grant
Closeout, implies that 90 days is the cutoff to closeout all grant related
tasks.
OIG Evaluation of Auditee Comments
It should be noted that the applicable NOFA states that any funds not expended
at the end of the grant term shall be remitted to HUD. We do not agree with the
BMHA interpretation of Article VI of the Grant Agreement. We believe that
article requires the BMHA to comply in full with all closeout requirements and
submit reports within 90 days after the end of the grant. This section does not
discuss drawing down grant funds after the termination date. In addition, our
review disclosed that many of the purchase orders and invoices were for costs that
were incurred after the Grant termination date.
Auditee Comments
d. Cost lack adequate supporting documentation
The BMHA contends that it requires all recipients to maintain cost records and
make them readily available to the BMHA at any point. The BMHA further
contends that a simply request or visit to a subrecipient would have given us as
much information as we may have needed. The BMHA now requires that full
documentation be filed with the voucher payment rather than certified financial
reports submitted.
OIG Evaluation of Auditee Comments
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We reviewed the documents that the BMHA had to support payments to various
subgrantee/contractors, and found that they did not adequately support the
payments. As a result, a determination as to whether the payments were
reasonableness, necessary or justification could not be performed.
3. LACK OF EFFECTIVE CONTROLS OVER CONTRACT COSTS
Auditee Comments
a. Contract Log not adequately maintained.
The BMHA agrees with this portion of the finding and is in the process of setting
up a contract log.
b. Statement of work lacks adequate details.
The BMHA contends that this issue is currently being addressed.
c. Contract executed after service period had started.
The BMHA agrees with this statement.
d. Terms of a contract allowed unreasonable administrative fees to be
charged.
BMHA officials contends that after a review, they agree with the need to
reevaluate such costs before contracting with vendors and a need to tie the
payment method into results and progress instead of simply billing.
RECOMMENDATIONS
We recommend that you instruct the BMHA to:
1A. Establish acceptable budgetary and accounting controls that will provide
adequate assurance that PHDEP expenditures are documented, reasonable,
and eligible in accordance with PHDEP grant agreements and program
requirements.
1B. Remove ineligible costs of $275,827.69 from the appropriate PHDEP
grants.
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1C. Review questionable and/or unsupported expenditures, which totaled
$466,132.08 and assure that only costs which are eligible, reasonable and
in accordance with the PHDEP grant requirements are included in PHDEP
costs.
1D. Establish effective controls over contracts executed, which would include:
maintaining proper contract logs, assuring that all contracts contain an
adequate statement of work, and executed prior to the performance of
services.
1E. Submit all changes to its programs to your office so that an eligibility
determination can be made. The submission should include all unapproved
activities as well as approved activities with budget overruns or costs in
excess of budgeted amounts.
In addition, we recommend that your office:
1F. Determine whether the BMHA should be allowed to keep the $141,468.15
drawn down and expended subsequent to the termination date of its FY
1994 PHDEP.
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Finding 2
The BMHA Has Not Established Adequate
Procedures to Monitor and Evaluate Activities of
its PHDEP
The BMHA did not develop adequate procedures to monitor and evaluate
activities of its PHDEP. Specifically, the BMHA did not: (1) submit completed
outcome monitoring and semi-annual performance reports, and ,(2) establish a
system to obtain drug related crime statistics. We attribute these deficiencies to the
BMHA’s failure to establish adequate procedures and clear lines of responsibility
to ensure that grant requirements are met. Consequently, the BMHA can not
provide adequate assurances that it has made satisfactory progress towards
meeting its drug elimination goals.
24 CFR 761.35 provides that Grantees are responsible for managing the day to day
operations of the grant and subgrant supported activities. Grantees must monitor
grant and subgrant supported activities to assure compliance with applicable
Federal requirements and that performance goals are being achieved. Grantee
monitoring must cover each program, function and activity of the grant.
Outcome Monitoring Reports Were Incomplete
Our review disclosed that the outcome monitoring reports that the BMHA
submitted were incomplete. We reviewed five reports that the BMHA submitted to
HUD between January 1995 and July 1997. The BMHA reported that the
information was unknown in all the reports regarding the community wide crime
statistics. In fact, they did not report any crime statistics relating to the housing
authority in their last three reports. The first report only had the total arrests for
drug offenses authority wide. Moreover, other portions of the report were either
not submitted or submitted but partially completed. For example, the BMHA did
not submit Table 3, Housing Authority Management Indicators in its first report.
Likewise, the same table was only partially completed in subsequent reports.
The purpose of the report is to provide HUD with a means to determine the
PHDEP effectiveness. Further, it allows HUD the opportunity to modify
programs to improve the rate of drug and crime reduction. Because the BMHA
failed to provide the necessary information, HUD was hindered from measuring
the impact of the PHDEP funds on crime rates, and from measuring the resident's
satisfaction with the initiatives that have been implemented.
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Semi-Annual Performance Reports Were Incomplete
Also, the semi-annual performance reports that the BMHA submitted were
incomplete. They did not include changes in crime statistics for three reporting
periods in FYs 1996 and 1997. Further, our comparison of activities approved
under the 1995 PHDEP and the programs that were funded indicated several
discrepancies. For example, there were 28 programs listed in the budget for drug
prevention that were not funded. Also, there were 3 programs not in the budget,
but were funded by the BMHA. Lastly, there were a number of programs that the
BMHA funded for considerably more than the amount HUD approved in the
budget. However, the BMHA did not report these changes in the semi-annual
performance reports. One of the provisions in the semi-annual performance report
is to provide a description of other programs that may have been initiated,
expanded, or deleted with an identification of the resources and the number of
people involved with the programs and their relation to the approved plan (24 CFR
761.35 (a)(1)(vi)). Since the BMHA did not report these changes, HUD would be
under the assumption that the BMHA conducted the program as approved under
the budgeted plan. Also, for the three programs not in the budget, the BMHA did
not develop quantifiable objectives. Thus, there was no standards to measure the
performance or success of these programs.
Lack of Crime Statistics
Additionally, our review disclosed that there was a lack of crime statistics in both
the outcome monitoring and the semi-annual performance reports as discussed
above. We spoke to the Grant Coordinator who explained that there were factors
that caused the outcome reports to be completed in such a manner. First, the
official explained that the BMHA did not have a systematic means to get the
statistical drug related crime data from their public safety department; and initially,
the department would send her annual crime data. Eventually due to staff turnover
in the public safety office, the persons gathering this data changed and the
information started arriving in a piecemeal manner. In this regard, the Grant
Coordinator explained that the notification to prepare the outcome monitoring
report was issued on a one page facsimile from HUD Central Office without an
explanation as to what the report represented or how the BMHA was suppose to
use the report. Second, the official claimed that there was no guidance from the
HUD Buffalo Area Office on how to fill out the forms. The official advised that
because of these factors, the BMHA submitted the reports with incomplete drug
related crime data and believed this was acceptable since HUD never questioned
the reports.
Furthermore, the Grant Coordinator informed us that the outcome monitoring
report did not have much information regarding the crime statistics because the
BMHA submitted the information in detail as part of the semi-annual performance
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report. However, we noted three of the semi-annual performance reports covering
the period between January 1, 1996 and June 30, 1997 did not have any data on
the change in crime statistics. Further, we noted that two of the reports had the
following statement “Not available due to lack of public safety personnel and an
agreement between the Buffalo Municipal Housing Authority and the City of
Buffalo Police Department for services such as covering 911 and all emergency
calls. Statistical data is therefore unavailable at the time of this report.” The
Grant Coordinator told us that the lack of information was due to the turnover at
the public safety office. Also, since all 911 calls for the City of Buffalo are tracked
by the public safety computer system, the information was hard to separate
between the City of Buffalo and BMHA related calls.
We were told that the Grant Coordinator established a system in 1997 whereas a
copy of the arrest reports is sent to that official. Thus, all arrests and a
breakdown of the types of arrests can be tracked. Also, the BMHA have hired a
Criminal Statistician under the FY 1997 grant to help track crime statistics.
Auditee Comments
The Grantee agreed to do the following:
The Grantee will establish quantitative goals that can be effectively measures and
will monitor the progress in meeting those goals.
Statistical reports will be prepared by the crime analyst, which will be reviewed
and approved by the Director of Public Safety.
The procedural manual will include all deadline dates and copies of forms to be
submitted and evaluated.
All applications will clearly state the goals of the programs
All funded programs will have to file quarterly reports which the Grantee will
monitor on a regular basis.
Recommendations
We recommend that your office ensure that the BMHA:
2A. Establish and implement procedures that effectively measure the outcomes
and impact of all PHDEP related funded programs.
2B. Develop work plans that define the responsibilities of staff responsible for
monitoring the various programs and data collection of PHDEP statistics.
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These plans should also include procedures that will ensure that proper
monitoring and data collection when there are changes in personnel.
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Internal Controls
In planning and performing our audit, we considered the internal controls of the
Buffalo Municipal Housing Authority, specifically as related to it’s Public Housing
Drug Elimination Program (PHDEP), in order to determine our audit procedures
and not to provide assurance on internal controls. Internal controls are the process
by which an entity obtains reasonable assurance as to achievement of specific
objectives. They consist of interrelated components, including integrity, ethical
values, competence, and the control environment which includes establishing
objectives, risk assessment, information systems, control procedures,
communication, managing change, and monitoring.
Internal controls assessed
We determined that administrative and accounting controls in the following areas
were relevant to our audit objective:
• Financial Controls over Program Funds
• Expenditure Reviews
• Budget Oversight
• Allocation of Costs
• Program Monitoring
• Procurement and Contracting
We evaluated all of the control categories identified above by determining the risk
exposure and assessing control design and implementation.
Assessment results
It is a significant weakness if internal controls do not give reasonable assurance
that resource use is consistent with laws, regulations, and policies; that resources
are safeguarded against waste, loss, and misuse; and that reliable data are obtained,
maintained and fairly disclosed in reports.
Significant internal control weaknesses exists in all areas
Based on our review, there are significant weaknesses over the BMHA’s ability to
administer the PHDEP. Specific weaknesses were identified in the internal control
areas over all the controls listed above. These weaknesses are described in the two
findings contained in this report.
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Appendices
Appendix A
Schedule of Ineligible and Questionable Salary
Costs
Total
1995 PHDEP 1996 PHDEP Ineligible Questionable
Position Salary Costs Salary Costs Costs Salary Costs
Unapproved
Position
Senior Accountant $ 5,161.49 $0.00
Statistical Clerk 12,100.28 0.00
Case Manager 0.00 0.00
Sub-Total $ 17,261.77 $0.00 $17,261.77
Non PHDEP
Position
Typist $ 22, 320.03 $ 3,988.38 $26,308.41
Supplanted
Existing Positions
Tenant Relations
Aide $ 6,902.17 $ 61,756.40
Tenant Relations
Specialists 0.00 142,856.09
Case Manager 0.00 20,742.85
Sub-Total $ 6,902.17 $225,355.34 $232,257.51
Unallowable
Positions
Clerk Aides $154,054.38 $ 8,099.55 $162,153.93
Grand Totals $200,538.35 $237,443.27 $275,827.69 $162,153.93
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Appendix B
Schedule of Ineligible and Unsupported Costs
Finding Ineligible (1) Unsupported (2)
Number
1 $275,827.69 $466,132.08
Total $275,827.69 $466,132.08
(1) Cost clearly not allowed by law, contract, HUD or local agency policies and
regulations.
(2) Costs not clearly eligible or ineligible but warrant being contest (e.g. lack of
satisfactory documentation to support the eligibility of the costs, etc.)
Appendix C
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Auditee Comments
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Appendix D
Distribution
Secretary’s Representative, New York/New Jersey, 2AS
Director, Office of Public Housing, Buffalo Area Office, 2CPH (2)
Field Comptroller, Midwest Field Office, 5AF
CFO, Mid-Atlantic Field Office, 3AFI
Buffalo Area Coordinator, 2CS
Assistant to Deputy Secretary for Field Policy and Management, SDF,
Room 7106
Office of Public and Indian Housing, PF (Attention: Comptroller,
Room 5156) (5)
Acquisitions Librarian, Library, AS (Room 8141)
Deputy Assistant to the Secretary for Labor Relations, SL, Rm. 7118
Chief Financial Officer, F (Room 10164) (2)
Deputy Chief Financial Officer for Finance, FFC (Room 10176) (2)
Director, Office of the Budget, FO (Room 3270)
Associate General Counsel, Office of Assisted Housing and Community
Development, CD (Room 8162)
Executive Director, Buffalo Municipal Housing Authority, Buffalo, New York
Inspector General, G (Room 8256)
Public Affairs Officer, G (Room 8256)
Counsel to Inspector General, GC (Room 8260)
Internet Coordinator, GAA (Room 8172)
Assistant Inspector General for Audit, GA (Room 8260)
Deputy AIGA, GA (Room 8286)
Director, Research & Planning, GAP (Room 8180)
Director, Financial Audits Division, GAF (Room 8282)
Semi Annual Coordinator, GF (Room 8254)
Central Files, GF (Attn: Mary E. Dickens, Room 8266) (2)
SAC, OIG, 2GI Room 3430B
AIG, OIG, GI Room 8274)
Director, Housing & Community Development Issue Area
US GAO, 44l G Street, NW, Room 2474
Washington, DC 20548
(Attention: Judy England-Joseph)
Subcommittee on General Oversight & Investigations
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O’Neill House Office Building - Room 212
Washington, DC 20515
(Attn: Cindy Sprunger)
Director, HUD Enforcement Center
1240 Maryland Avenue, Suite 200
Washington, DC 20024
Honorable Pete Sessions
Government Reform & Oversight Committee
Congress of the United States
House of Representatives
Washington, DC 20510-4305
Honorable John Glenn
Ranking Member
Committee on Governmental Affairs
United States Senate
Washington, DC 20515-4305
Honorable Dan Burton, Chairman
Committee on Government Reform & Oversight
House of Representatives
Washington, DC 20515-6143
Honorable Fred Thompson, Chairman
Committee on Governmental Affairs
United States Senate
Washington, DC 20515-4305
31
Buffalo HA, Public Housing Drug Elimination Program, Buffalo, NY
Published by the Department of Housing and Urban Development, Office of Inspector General on 1998-10-27.
Below is a raw (and likely hideous) rendition of the original report. (PDF)