We completed a capacity review of the Housing Authority of the City of Los Angeles’ (Authority) capital fund grant awarded under the American Recovery and Reinvestment Act of 2009 (Recovery Act) program. We performed the audit because Recovery Act reviews are part of the Office of Inspector General’s (OIG) annual plan and the Authority was awarded a significant amount of program funds. Our objective was to evaluate the Authority’s capacity in the areas of internal controls, eligibility, financial controls, procurement, and output/outcomes in administering its Recovery Act funds. We determined that the Authority generally had adequate capacity to manage and administer its Recovery Act funding. However, we identified various weaknesses that could impact the Authority’s ability to effectively manage and administer its Recovery Act funding in the most economical and efficient manner. Specifically it (1) did not properly procure two of its contracts or evaluate compliance with requirements for a third contract, (2) failed to include all provisions required by 24 CFR (Code of Federal Regulations) 85.36(i) for five of its contracts, (3) did not record its employees’ time accurately and consistently in its manual and Oracle time cards, (4) did not develop sufficient written policies and procedures to monitor for Davis-Bacon compliance, and (5) did not maintain documentation to show that Davis-Bacon certified payrolls were received and reviewed for compliance.

We recommend that the Director of the Los Angeles Office of Public Housing (1) require the Authority to provide support showing the eligibility and reasonableness of $369,259 disbursed for the repair of 12 fire-damaged units at Nickerson Gardens or reimburse this amount to its Recovery Act program, as appropriate, from non-Federal funds, (2) closely monitor the intergovernmental purchasing agreement transactions of the Authority for the quarters ending December 31, 2010, March 31, 2011, and June 30, 2011 to ensure that it follows the U.S. Department of Housing & Urban Development’s (HUD) and its own procurement requirements, (3) implement procedures to ensure that it includes all mandatory contract provisions as required by 24 CFR 85.36(i), (4) rescind the Authority’s HA-2006-047 Home Depot contract and require it to re-bid it out in compliance with 24 CFR 85.36(c) and its own internal procurement policy, and (5) monitor the Authority to ensure that it implements the procedures it has in place to establish project numbers before beginning work at each development. We also recommend that the Director of the Los Angeles Office of Public Housing require the Authority to (1) reallocate the payroll of force account employees in the Oracle system to the correct project numbers between September 12, 2009, and February 12, 2010, and (2) develop and implement formal written policies and procedures to assist staff in monitoring for Davis-Bacon compliance.