Finding 564085 (2023-002)

Material Weakness
Requirement
I
Questioned Costs
$1
Year
2023
Accepted
2025-06-05
Audit: 358177
Organization: Sanford Housing Authority (NC)

AI Summary

  • Core Issue: The Authority failed to document proper procurement processes for $121,125 in contractor payments, violating federal regulations.
  • Impacted Requirements: Noncompliance with federal procurement standards (2 CFR 200.320) due to inadequate internal controls and lack of staff training.
  • Recommended Follow-Up: Provide additional training for staff on federal procurement standards and implement review procedures to ensure compliance.

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.

Corrective Action Plan

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. Recommendation: Authority personnel responsible for acquiring goods and services should receive additional training regarding the federal standards for procurement. Action Taken: To address the identified deficiencies and restore compliance, the Authority will implement the following corrective actions: 1. Training and Capacity Building: Provide comprehensive online and in-person training on procurement, contract management, and budget accountability for all relevant staff. Train management staff on participating in procurement selection committees and evaluating Requests for Proposals (RFPs), Requests for Quotations (RFQs), and Invitations for Bids (IFBs). Include budget literacy and financial planning modules in all staff training programs to ensure understanding of budget development, monitoring, and compliance. 2. Third-Party Assessment and Policy Updates: Engage a third-party firm to assess procurement, contract management, and budget oversight operations. Revise the current procurement policy, standard operating procedures (SOPs), and budget management protocols to ensure alignment with best practices. Update internal controls and financial policies to ensure alignment with HUD regulations and best practices. 3. Process Improvement and Technology Integration: Develop a process map based on assessment findings to streamline procurement and budget workflows, thereby reducing risk. Implement an affordable, user-friendly eProcurement software solution tailored to the affordable housing sector. Evaluate the need for a dedicated staff member to manage the eProcurement system, including vendor management, proposal evaluation, contract oversight, reporting, and system integration. 4. Transparency and Outreach: Create and maintain a procurement page on both the current and new Authority websites. Publicize procurement opportunities through social media and other outreach channels. Publish budget summaries and procurement plans to promote transparency and stakeholder confidence. 5. Governance and Accountability: Ensure all relevant staff, including finance, executive leadership, asset management, and others, are trained in procurement, contract management, and budget accountability. Reinforce best practices by designating the Chief Executive Officer as the sole Contracting Officer authorized to enter into agreements on behalf of the Authority. Establish regular internal audits and budget reviews to monitor compliance and performance.

Categories

Questioned Costs Procurement, Suspension & Debarment

Other Findings in this Audit

Programs in Audit

ALN Program Name Expenditures
14.871 Section 8 Housing Choice Vouchers $4.70M
14.850 Public Housing Operating Fund $1.08M
14.872 Public Housing Capital Fund $830,580
14.870 Resident Opportunity and Supportive Services - Service Coordinators $67,547
14.896 Family Self-Sufficiency Program $13,556