We are conducting an audit of the Lackawanna Municipal Housing Authority’s (Authority) administration of its capital fund program. We selected this auditee because the Authority pledged its future capital fund appropriations to perform a special project as part of the Capital Fund Financing Program. Specifically, the Authority incurred a $4.25 million long-term liability to perform lead-based paint abatement and modernization work at 90 project units. The review has raised an issue of concern related to the Authority’s capacity to administer its capital fund program. Specifically, t he Authority has not established the operational procedures to implement its procurement policy to ensure compliance with all applicable regulations. As a result, it lacks assurance that capital fund expenditures were necessary or reasonable and that services contracted for were provided as intended. This lack of oversight by the Authority to ensure that capital fund contracts are awarded in a prompt, fair, and reasonable manner is a major concern in light of the Authority’s receiving an additional $1.5 million in capital funds under the American Recovery and Reinvestment Act of 2009. The Authority has budgeted $600,000 in Recovery Act funds to complete change orders to the lead-based paint abatement and modernization contract.
We recommend that HUD (1) review the content of the change order and, if appropriate, prohibit the Authority from using recovery funds for change orders associated with the lead abatement and modernization contract, and (2) certify that the Authority’s new procedures established meet the federal procurement requirements as required by 24 CFR Part 85. We also recommend that HUD instruct the Authority to (3) establish and implement operational procedures to ensure compliance with all applicable federal, state, and local procurement policies and regulations for all future procurement activities when obtaining goods and services, (4) obtain HUD approval for all procurement activities, (5) establish and implement a training program on procurement procedures for all Authority staff and board members involved in the contracting process, and (6) establish performance measurements as a method to evaluate that the requirements of the procurement process are met.