We completed a review of the Lowell Housing Authority’s Public Housing and Recovery Act Capital Fund programs, including its force account activities.  We selected this auditee based on a news articles identifying concerns with the Authority’s use of force account labor.  The objectives of the audit were to determine whether the Authority (1) administered its force account modernization program in accordance with U.S. Department of Housing and Urban Development (HUD) rules and regulations, and (2) followed HUD procurement regulations and its own procurement policy.

Our review determined that the Authority did not always operate its force account modernization program in compliance with HUD regulations.  In addition, Authority officials did not always follow proper procurement procedures.  As a result, more than $6.7 million in Federal capital funds and $2.5 million in Federal American Recovery and Reinvestment Act funds expended for the force account program were unsupported. Further, Authority officials could not assure HUD that their procurement process was fair and equitable, and that they obtained the most favorable prices or best quality for items totaling more than $2.2 million, including $262,513 in American Recovery and Reinvestment Act funds that were charged to Federal programs.

We recommend that the Director of HUD’s Boston Office of Public Housing require Authority officials to conduct an independent cost analysis for each of the 14 force account activities for which the Authority failed to perform initial costs estimates and maintain construction records and modernization files to ensure that more than $6.7 million in capital funds and $2.5 million in Recovery Act funds charged to Federal program were reasonable and supported.  In addition, we recommend that Authority officials conduct a review to determine whether more than $2.2 million in procurement costs charged to the Federal capital fund and Recovery Act programs were reasonable and supported.