Finding Text
2023-002 Procurement and Suspension and Debarment – Proper Documentation
14.872 Public Housing Capital Fund
Material Weakness in Internal Control, Material Noncompliance
Condition: The Authority did not have adequate controls over compliance with federal regulations regarding procurement. During the audit period, Authority paid amounts to a contractor for unit turnover and renovation totaling $121,125 without documenting that it had properly procured these services.
Criteria: Federal regulations (2 CFR 200.320) provide the methods of procurement to be followed when acquiring goods or services. Specifically, quotations must be obtained from an adequate number of qualified sources when procuring goods or services that exceed the micro-purchase amount and sealed bids are required when the goods or services to be procured exceed the simplified acquisition threshold of $250,000.
Questioned Costs: $121,125.
Effect: The Authority expended public housing capital fund monies for services without following proper federal procurement standards.
Cause: The Authority was unable to provide the required procurement documentation due to the following factors:
• Operational Disruptions: The relocation of the administrative office disrupted access to essential records. In addition, significant turnover in key management and procurement staff during the audit period contributed to lapses in procurement oversight and documentation.
• Performance and Compliance Issues: The Authority failed its 2022 Public Housing Assessment System (PHAS) review, resulting in a “Troubled Agency” designation and a score of 5 out of 10 for the Capital Fund Program (CFP). Despite commitments made in its October 27, 2023, response to HUD and its Troubled Recovery Plan, the Authority did not follow through on key corrective actions, including: Engaging with high-performing PHAs for peer-to-peer training; training staff on procurement practices; obtaining a list of contractors from the state; and acquiring a procurement policy from a high-performing PHA.
• Lack of Internal Controls, Training, and Budget Awareness: The Authority lacked adequate checks and balances across departments. Staff in finance, executive leadership, asset management, and other key areas did not demonstrate a basic understanding of procurement, contract management, or budgetary principles. Asset management staff frequently procured goods and services without understanding or adhering to procurement regulations, internal policies, or budget constraints. There was a general lack of awareness and accountability regarding budget planning, monitoring, and adherence, leading to overspending, misallocation of funds, and insufficient documentation of financial decisions.
• Procurement Irregularities: The Authority routinely solicited quotes only from familiar vendors, rather than conducting open and competitive sourcing. Vendors with a history of substandard performance were allowed to continue working, often requiring repeated corrective actions and causing project delays. Some vendors were restricted from working at specific developments but continued to operate at others. Certain vendors bypassed standard payment protocols by seeking direct authorization from senior leadership, undermining financial governance.
Recommendation: Authority personnel responsible for acquiring goods and services should receive additional training regarding the federal standards for procurement.
Views of Responsible Officials of the Auditee: The Authority concurs with this finding and will implement review procedures and provide ongoing training to staff.