Audit 8933

Tenant Eligibility Requirements. Federal Program: Public and Indian Housing, Federal Assistance Listing No. 14.850. Criteria or specific requirement: Eligibility requirements in accordance with 24 CFR 960 relating to admission to, and occupancy of, public housing. Condition: The audit identified exceptions in tenant files exams relating to waiting list, income verification, and executed Forms 9886. Context: The audit identified one rent calculation errors, five waiting list exceptions, and one file not containing an executed Form 9886 from a sample 23 tenants reviewed. Effect: The errors noted are due to lack of supporting documentation. Cause: Weakness in internal controls over tenant’s annual certifications relating to proper documentation and calculation of rent. Identification as a repeat finding: This is a repeat finding (See 2022-003). Recommendation for Corrective Actions: Establish procedures for management review and supervision over tenant’s annual certifications. Specific internal control procedures should be implemented to ensure, for both family income examinations and reexaminations, documentation in the family file of (1) waiting list documentation; (2) properly executed rent choice documentation; (3) utility allowance schedule annually and (4) other factors that affect the determination of adjusted income or income- based rent in accordance with CFR section 960. Views of Responsible Officials and Planned Corrective Actions: We will review tenant’s files for the deficiencies identified above and implement new internal control procedures to correct these conditions. We will also provide increased supervision and training over this area. We anticipate a complete resolution of this type of error by February 29, 2024.

Davis-Bacon Act Wage Compliance. Federal Program: Public and Indian Housing, Federal Assistance Listing No. 14.850. Criteria: The Davis-Bacon Act requires that all laborers and mechanics employed by contractors or subcontractors for work on construction contracts more than $2,000 financed by Federal assistance funds must be paid wages not less than those established for the locality of the project (prevailing wage rates) by the DOL (40 USC 276a to 276a-7). Condition: A review of internal controls over monitoring of the wage rates for compliance with the Davis Bacon Act revealed that contracts were not being monitored for compliance with the Act. Wage rates for local and smaller contractors were not being monitored nor were any certified payrolls provided to the Authority. Effect: Wage rates may not be in compliance with federal regulations. Recommendation: Internal controls should be established to collect, review, and monitor wages paid by contractors to its workers. The Authority should enforce submission of payrolls by withholding funds until the contractor has complied with the certified payroll submission. The Authority should review each payroll to ensure wages are at least the minimum wage rate for the worker’s classification. The Authority should periodically interview construction workers on site to verify the validity of the payroll information. View of Responsible Officials and Planned Corrective Actions: We were not aware of the requirement to monitor wage rates for contracts below the sealed bid procurement requirements. We will establish internal controls to collect, review and monitor wages paid by contractors to its workers. We will enforce submission of payrolls by withholding funds until the contractor has complied with the certified payroll submission. We will review each payroll to ensure wages are at least the minimum wage rate for the worker’s classification. We will also periodically interview construction workers on site to verify the validity of the payroll information.

Procurement Procedures. Criteria: Housing Authorities are required to follow a written procurement policy to provide full and open competition. The Authority has not adopted a customized procurement plan but rather defaults to HUD Handbook 7460.8 REV2, dated 2/2007. The handbook states that the Authority must solicit price quotes from an adequate number of qualified sources (generally defined as not less than three) for purchases exceeding the micro purchase limit ($2,000) but less than the sealed bid threshold of $100,000. In situations where the multiple price quotes are not available, the Authority should document its justification for awarding the contract. Condition: Several instances of smaller contracts were executed without documented bids or quotes nor were noncompetitive proposals properly documented. We noted disbursements totaling $266,715 without proper solicitation and/or documentation of procurement action which we consider to be questioned costs. Effect: Full and open competition may not have been provided and the lack of sufficient quotes may provide an environment where the contract price may not reflective of the open market. Recommendation: The Authority should establish procedures to solicit enough price quotes. In the situation where an adequate number of price quotes cannot be obtained, the Authority should document their conclusion as why the contract should be approved and perform a cost analysis to ensure the costs are reasonable. The Authority should consider soliciting quotes on annual basis for certain repeated contracts (unit painting, unit turnovers, etc.) to help alleviate the documentation burden. Views of Responsible Officials and Planned Corrective Actions: We have a limited number of competent contractors working in our area but will attempt to obtain more price quotes. In cases where we do not receive an adequate number of price quotes, we will document our reason for awarding the contract and document the cost analysis to determine reasonableness of the costs.

Tenant Eligibility Requirements. Federal Program: Public and Indian Housing, Federal Assistance Listing No. 14.850. Criteria or specific requirement: Eligibility requirements in accordance with 24 CFR 960 relating to admission to, and occupancy of, public housing. Condition: The audit identified exceptions in tenant files exams relating to waiting list, income verification, and executed Forms 9886. Context: The audit identified one rent calculation errors, five waiting list exceptions, and one file not containing an executed Form 9886 from a sample 23 tenants reviewed. Effect: The errors noted are due to lack of supporting documentation. Cause: Weakness in internal controls over tenant’s annual certifications relating to proper documentation and calculation of rent. Identification as a repeat finding: This is a repeat finding (See 2022-003). Recommendation for Corrective Actions: Establish procedures for management review and supervision over tenant’s annual certifications. Specific internal control procedures should be implemented to ensure, for both family income examinations and reexaminations, documentation in the family file of (1) waiting list documentation; (2) properly executed rent choice documentation; (3) utility allowance schedule annually and (4) other factors that affect the determination of adjusted income or income- based rent in accordance with CFR section 960. Views of Responsible Officials and Planned Corrective Actions: We will review tenant’s files for the deficiencies identified above and implement new internal control procedures to correct these conditions. We will also provide increased supervision and training over this area. We anticipate a complete resolution of this type of error by February 29, 2024.

Davis-Bacon Act Wage Compliance. Federal Program: Public and Indian Housing, Federal Assistance Listing No. 14.850. Criteria: The Davis-Bacon Act requires that all laborers and mechanics employed by contractors or subcontractors for work on construction contracts more than $2,000 financed by Federal assistance funds must be paid wages not less than those established for the locality of the project (prevailing wage rates) by the DOL (40 USC 276a to 276a-7). Condition: A review of internal controls over monitoring of the wage rates for compliance with the Davis Bacon Act revealed that contracts were not being monitored for compliance with the Act. Wage rates for local and smaller contractors were not being monitored nor were any certified payrolls provided to the Authority. Effect: Wage rates may not be in compliance with federal regulations. Recommendation: Internal controls should be established to collect, review, and monitor wages paid by contractors to its workers. The Authority should enforce submission of payrolls by withholding funds until the contractor has complied with the certified payroll submission. The Authority should review each payroll to ensure wages are at least the minimum wage rate for the worker’s classification. The Authority should periodically interview construction workers on site to verify the validity of the payroll information. View of Responsible Officials and Planned Corrective Actions: We were not aware of the requirement to monitor wage rates for contracts below the sealed bid procurement requirements. We will establish internal controls to collect, review and monitor wages paid by contractors to its workers. We will enforce submission of payrolls by withholding funds until the contractor has complied with the certified payroll submission. We will review each payroll to ensure wages are at least the minimum wage rate for the worker’s classification. We will also periodically interview construction workers on site to verify the validity of the payroll information.

Procurement Procedures. Criteria: Housing Authorities are required to follow a written procurement policy to provide full and open competition. The Authority has not adopted a customized procurement plan but rather defaults to HUD Handbook 7460.8 REV2, dated 2/2007. The handbook states that the Authority must solicit price quotes from an adequate number of qualified sources (generally defined as not less than three) for purchases exceeding the micro purchase limit ($2,000) but less than the sealed bid threshold of $100,000. In situations where the multiple price quotes are not available, the Authority should document its justification for awarding the contract. Condition: Several instances of smaller contracts were executed without documented bids or quotes nor were noncompetitive proposals properly documented. We noted disbursements totaling $266,715 without proper solicitation and/or documentation of procurement action which we consider to be questioned costs. Effect: Full and open competition may not have been provided and the lack of sufficient quotes may provide an environment where the contract price may not reflective of the open market. Recommendation: The Authority should establish procedures to solicit enough price quotes. In the situation where an adequate number of price quotes cannot be obtained, the Authority should document their conclusion as why the contract should be approved and perform a cost analysis to ensure the costs are reasonable. The Authority should consider soliciting quotes on annual basis for certain repeated contracts (unit painting, unit turnovers, etc.) to help alleviate the documentation burden. Views of Responsible Officials and Planned Corrective Actions: We have a limited number of competent contractors working in our area but will attempt to obtain more price quotes. In cases where we do not receive an adequate number of price quotes, we will document our reason for awarding the contract and document the cost analysis to determine reasonableness of the costs.