[Audit Report on Low Income Housing Program Grants, Virgin Islands Housing Authority]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 00-i-625

Title: Audit Report on Low Income Housing Program Grants, Virgin
       Islands Housing Authority

Report (No. 00-i-625)

          Title:    AUDIT REPORT LOW INCOME HOUSING PROGRAM GRANTS,
     VIRGIN ISLANDS HOUSING AUTHORITY
          Date:     October 6, 2000


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U.S. Department of the Interior
Office of Inspector General
          
                           
AUDIT REPORT
LOW INCOME HOUSING PROGRAM GRANTS,
VIRGIN ISLANDS HOUSING AUTHORITY 
                           
REPORT NO. 00-I-625 
AUGUST 2000 U.S. Department of the Interior Office of Inspector General
                              
                              
EXECUTIVE SUMMARY
                              
Low Income Housing Program Grants, Virgin Islands Housing Authority
Report (No. 00-I-625) August 2000
  
  
BACKGROUND
  
The Virgin Islands Housing Authority is a public housing corporation that operates under the provisions of the U.S. Housing Act of
1937 (42 U.S.C. 1401) and the Virgin Islands Code (29 VIC Chapter 1).  The Authority is responsible for planning, financing,
constructing, maintaining, and managing 32 public housing communities, containing 4,253 public housing units, in the Virgin Islands. 
The Authority received funding from three different sources--the U.S. Department of Housing and Urban Development (HUD), the
Government of the Virgin Islands, and rental payments from tenants.  As of September 30, 1999, the Authority had  received from
HUD $16 million of the $21.3 million operating subsidy and $2.7 million of  the $4.3 million Section 8 housing assistance subsidy for
fiscal year 1999 and a $2.1 million grant to relocate 296 families who lived in the Donoe public housing community on St. Thomas. 
The Authority also received $498,000 of $600,000 appropriated by the  Government of the Virgin Islands for fiscal year 1999 and
rental income from its public housing units totaling $3.7 million for fiscal year 1999 (through August 31, 1999).  
  
OBJECTIVE
  
The objective of the audit was to determine whether (1) the Authority complied with grant terms and applicable laws and regulations;
(2) charges made against grant funds were reasonable, allowable, and allocable pursuant to the grant agreement provisions; and (3)
funds received through electronic transfers were appropriately deposited to and accounted for in the Authority's
financial management system.
  
RESULTS IN BRIEF
  
The Authority administered the operating subsidy and Section 8 Program grants in accordance with grant terms and applicable laws
and regulations.  Specifically, charges made against the grant funds generally were reasonable, allowable, and allocable pursuant to
grant agreement provisions; procurement actions were made in accordance with the Authority's procurement guidelines; and
allotments received through electronic funds transfer were appropriately deposited to the Authority's bank account.  However, we
found that internal controls could be improved with regard to processing purchase orders, recording electronic fund transfers,
reconciling bank accounts, authorizing and supporting overtime charges, maintaining purchase order logs, and computing Section 8
rental assistance payments.  As a result, a contractor received 14 duplicate payments totaling $145,307; HUD contributions of $1.1
million were excluded from the Authority's Statement of Operating Receipts and Expenditures report; three electronic funds transfers
totaling $339,158 were not recorded in the Authority's financial management system; bank overdraft charges totaled $2,628;
unsupported overtime costs totaled $3,757; and 877 purchase orders for an undeterminable amount were not included in
the Authority's purchase order log.  We also found that the Authority made overpayments and underpayments totaling $125 per month
in the computation of the Section 8 rental assistance payments to 6 of 45 participants reviewed.
  
RECOMMENDATIONS
  
We made eight recommendations to the Executive Director of the Housing Authority to correct the internal control weaknesses
disclosed by the audit.
  
AUDITEE COMMENTS AND OIG EVALUATION
  
The Executive Director of the Housing Authority, in response to the draft report, concurred with the eight recommendations.  Based on
the response, we consider seven  recommendations resolved and implemented and one recommendation resolved but not implemented.
           
  
  
  
 AUDIT REPORT
 
 Mr. Conrad E. Francois, II
 Executive Director
 Virgin Islands Housing Authority
 Post Office Box 7668
 St. Thomas, Virgin Islands 00801
  
     Subject:  Audit Report on Low Income Housing Program Grants, Virgin Islands Housing            Authority (No. 00-i-625)
  
Dear Mr. Francois:
  
This report presents the results of our review of low income housing program grants, consisting of an operating subsidy and the
Section 8 Program, administered by the Virgin Islands Housing Authority.  The objective of the audit was to determine whether (1) the
Authority complied with grant terms and applicable laws and regulations; (2) charges made against grant funds were
reasonable, allowable, and allocable pursuant to the grant agreement provisions; and (3) funds received through electronic transfers
were appropriately deposited to and accounted for in the Authority's financial management system.
        
BACKGROUND
  
The Virgin Islands Housing Authority is a public housing corporation that operates under the provisions of the U.S. Housing Act of
1937 (42 U.S.C. 1401) and the Virgin Islands Code (29 V.I.C. Chapter 1).  The Authority is governed by a Board of Commissioners,
consisting of nine members--five appointed by the Governor of the Virgin Islands and four elected by adult public
housing residents.  The Authority's day-to-day operations are managed by an Executive Director, who serves at the pleasure of the
Board of Commissioners.  The Authority is responsible for planning, financing, constructing, maintaining, and managing 32 public
housing communities, containing 4,253 public housing units, in the Virgin Islands.  To assist in this endeavor, the Authority  receives
an annual subsidy from the U.S.  Department of Housing and Urban Development (HUD) for the operation and maintenance of these
units.  As of September 30, 1999, the Authority had received all of the $23.4 million subsidy for fiscal year
1998 and $16 million of the $21.3 million subsidy for fiscal  year 1999.   

In addition, the Authority manages the Section 8 Housing Assistance Payment Program, which was established by Section 8(0) of the
U.S. Housing Act of 1937 (42 U.S.C. 1437).  The purpose of the Section 8 Program is to assist eligible families in paying rent for
decent, safe, and sanitary housing.  Section 8 Program guidelines require participants to contribute toward their rental payment the
greater of 10 percent of gross income, 30 percent of adjusted gross income, or a minimum of $25 per month.  To determine a family's
eligibility, the total family household income must be 80 percent or less of the median income for the area as determined by HUD.  As
of October 1999, 747 families participated in the Section 8  Program, and the Authority had a waiting list of 1,915 eligible families,
with an average waiting period of 5 years.  The Authority received annual contributions from HUD to fund the Section 8 Program.  As
of September 30, 1999, the Authority had received $3.7 million of the $4.2 million contribution  for fiscal year 1998 and $2.7 million
of the $4.3 million contribution for fiscal year 1999.  
  
In fiscal year 1999, the Authority also received funding from HUD totaling $2.1 million to relocate 296 families who lived in the
Donoe public housing community on St. Thomas.  The families were being relocated to private housing units under the Section 8
Program because the Donoe community was being demolished.  The Authority also received an annual appropriation from the
Government of the Virgin Islands to assist in the operation of water delivery and water treatment programs, elderly health programs,
and community service programs at the public housing units.  Although the Authority was appropriated $845,500 for fiscal year 1998
and $600,000 for fiscal year 1999, the Authority received only $450,000 for fiscal year 1998 and $498,000 for fiscal year 1999 from
the Government.  Further, the Authority received rental income from its public housing units totaling $5.3 million in fiscal year 1998
and $3.7 million in fiscal year 1999 (through August 31, 1999).  
  
SCOPE OF AUDIT
  
The scope of our audit included a review of the Authority's receipt and expenditure of the operating subsidy and Section 8 Program
grants during fiscal years 1998 and 1999 (through September 30).  To accomplish our audit objective, we reviewed applicable laws
and regulations for grant administration and procurement actions; grant-related receipts and expenditures, primarily for personnel,
equipment, and supplies; and eligibility requirements for the Section 8 Program.  In addition, we expanded the scope of our review to
include payments made to a contractor who performed vacant unit rehabilitation under the Comprehensive Grant Program (a
HUD-funded grant) during fiscal year 1999.  The audit was conducted during the period of September 1999 through March 2000 at the
Authority's central office on St. Thomas and at the following public housing communities on St.   Thomas:  Contant Knolls, Donoe,
Oswald Harris Court, Paul M. Pearson Gardens, Bovoni, Tutu Highrise, Michael J. Kirwan Terrace, Lucinda Millin Home for the
Aged, and the Anna's Retreat Community Center.  
  
The Authority received, through electronic funds transfer, weekly allotments from HUD for the operating subsidy and monthly
allotments from HUD for the Section 8 Program to cover grant-related expenditures.  Because funds were received either weekly or
monthly based on a predetermined allotment, the provisions of the Cash Management Improvement Act of  1990 to minimize the time
elapsing between the transfer of funds from the U.S. Treasury and the use of those funds by the Authority for program purposes were
not applicable to the HUD grants.  Therefore, that part of our original audit objective, determining the Authority's compliance with the
Act, was not accomplished.  

Our review was made, as applicable, in accordance with the "Government Auditing Standards," issued by the Comptroller General of
the United States.  Accordingly, we  included such tests of records and other auditing procedures that were considered necessary under
the circumstances.  
  
Our review included an evaluation of internal controls to the extent we considered necessary to accomplish the audit objective.  The
internal control weaknesses identified were related to the  financial administration of grants and the determination of Section 8
Program housing assistance payments.  The control weaknesses are discussed in the Results of Audit section of this report.  
The recommendations, if implemented, should improve the internal controls in these areas. 
  
PRIOR AUDIT COVERAGE
  
During the past 5 years, neither the General Accounting Office nor the Office of Inspector General has issued any audit reports on the
Authority's management of Federal grants.  However, related audit reports were issued as follows:
  
       - In April 1992, the Office of Inspector General issued the report "Billing and Collection Functions, Virgin Islands Housing
Authority, Government of the Virgin Islands" (No. 92-I-752).  The report stated that the Authority did not adequately control the tenant
recertification  process, the collection of delinquent accounts receivable, tenant files, and  petty cash funds.  The Authority concurred
with the report's 10 recommendations to address these issues and provided sufficient information for us to consider all of the
recommendations resolved and implemented. 
  
       - In June 1992, the Office of Inspector General issued the report "Vacancies and Rent Abatements, Virgin Islands Housing
Authority, Government of the Virgin Islands" (No. 92-I-935).  The report stated that (1) the Authority allowed approximately 400
housing units to remain vacant while awaiting repairs for more than 3 years and that, as a result, the Authority lost $2.6 million in
potential rental income for the period of 1975 to 1991 and (2) the Virgin Islands Legislature unnecessarily granted $2.2 million to the
Authority in conjunction with a blanket rent abatement enacted after Hurricane Hugo.  The Authority concurred with the
  report's three recommendations to address these issues and provided sufficient information for us to consider all of the
recommendations resolved and implemented.
  
       - In June 1999, an independent accounting firm issued the single audit report on the Authority for the fiscal years ended December
31, 1994, 1995, 1996, and 1997.  The report stated that the independent auditors were unable to issue an opinion on the financial
statements because (1) they could not obtain sufficient documentation to support adjustments to the General Fund cash account,
interfund balances, supplies and parts inventories for the St. Croix branch, income and expense reports, and balance sheet and income
and expense reports for the Section 8 program and (2) the Authority did not perform bank reconciliations in a timely manner or
maintain complete  accounting records  relating to the financial condition and operations.  The report also identified reportable
conditions and material weaknesses related to internal controls and compliance with laws and regulations applicable to HUD grant
funds.
  
       - In November 1999, an independent accounting firm issued the single audit report on the Authority for the fiscal year ended
December 31, 1998.  The report stated that, in the independent auditors' opinion, the financial statements presented fairly, in all
material respects, the financial position of the Authority in conformance with accounting practices, policies, and procedures
  prescribed by HUD.   In addition, the report stated that the Authority had resolved prior findings related to internal controls and
compliance and was taking action to resolve new findings related to (1) the reconciliation of financial reports to HUD financial
reports, (2) the filing of pertinent documents in employee personnel files, and (3) the accuracy of tenant accounts receivable records.
  
RESULTS OF AUDIT
  
The Authority administered the operating subsidy and Section 8 Program grants in accordance with grant terms and applicable laws
and regulations.  Specifically, charges made against the grant funds generally were reasonable, allowable, and allocable pursuant to
grant agreement provisions; procurement actions were made in accordance with the Authority's procurement guidelines; and
allotments received through electronic funds transfer were appropriately deposited to the Authority's bank account.  However, we
found that the administration of the operating subsidy and Section 8 Program grants could be improved by ensuring that (1)
purchase orders are canceled after payment to avoid making duplicate payments; (2) amounts received through electronic funds
transfers are accurately recorded in the Authority's financial management system and on financial reports; (3) bank accounts are
promptly reconciled; (4) overtime charges are properly authorized and adequately supported by source documentation; and (5)
grant-related documents such as purchase order logs are accurate, current, and complete.  Uniform administrative rules for Federal
grants awarded by HUD are established in 24 CFR 85, and the Authority's Personnel Procedural Manual contains the procedures for
the approval and documentation of overtime work performed in both emergency and nonemergency circumstances.  The Authority,
however, did not (1) have adequate controls to avoid paying duplicate invoices submitted by contractors, (2) monitor electronic funds
transfers from HUD, (3) have sufficient qualified personnel to timely perform bank reconciliations, (4) adhere to
overtime guidelines contained in the Authority's Personnel Procedural Manual, and (5) reconstruct records lost from its financial
management system.  As a result, a contractor received 14 duplicate payments totaling $145,307; HUD contributions of $1.1 million
were excluded from the Authority's Statement of Operating Receipts and Expenditures report; three electronic funds
transfers totaling $339,158 were not recorded in the Authority's financial management system; bank overdraft charges totaled $2,628;
unsupported overtime costs totaled $3,757; and 877 purchase orders for an undeterminable amount were not included in
the Authority's purchase order log.  We also found that the Authority made overpayments and underpayments totaling $125 per month
in the computation of the Section 8 rental assistance payments to 6 of 45 participants reviewed.
  
Grant Administration
  
According to 24 CFR 85.20(b)(2), "Grantees and subgrantees must maintain records which adequately identify the source and
application of funds provided for financially-assisted activities."  This section also states, "These records must contain information 
pertaining to grant or subgrant awards and authorizations, obligations, unobligated balances, assets, liabilities, outlays or expenditures,
and income."  Further, 24 CFR 85.20(b)(6) states, "Accounting records must be supported by such source documentation as canceled
checks, paid bills, payrolls, time and attendance records, contract and subgrant award documents, etc." 
  
                                 
Duplicate Payments.  In March 1999,a contractor was awarded a contract for vacant unit rehabilitation on St. Croix.  We  reviewed 88
payments totaling $926,000 made to this contractor during fiscal year 1999.  On April 29, 1999, the contractor submitted an
unnumbered invoice totaling $5,994 for rehabilitation of a vacant unit at a housing community, which the Authority
paid on May 14, 1999 from the operating subsidy grant.   On May 11, 1999, the contractor submitted an unnumbered invoice totaling
$5,994 for rehabilitation of the same vacant unit, which the Authority paid on May 28, 1999 from the operating subsidy grant.  We
found that the Authority did not cancel purchase orders in its financial management system after the related invoices  were paid and
that the Authority routinely printed duplicate copies of purchase orders from its financial management system to process requests for
payment.  Therefore, the Authority did not have an internal control mechanism to detect duplicate requests for payment.  We also
determined that during August and September 1999, the same contractor submitted 13 duplicate unnumbered invoices totaling
$139,313 under the Comprehensive Grant Program (a HUD-funded grant), that were paid by the Authority.   In total, we identified 14
duplicate payments totaling $145,307 to this contractor.  In March 2000, we discussed this matter with the
Authority's Comptroller, who told us that the Authority's Internal Auditor would conduct a detailed review of payments made to this
contractor.  In April 2000, the Authority's Executive Director, as a result of a Housing Police investigative review, dismissed several
Authority employees who were involved in the duplicate payments and initiated action to recover the duplicate payments.
  
Electronic Funds Transfers.  The Authority had one combined savings/checking  account for the operating subsidy and two passbook
savings and two checking accounts for the Section 8 Program.  The Authority did not reconcile the Section 8 Program checking
accounts during fiscal year 1998 and did not reconcile the accounts in fiscal year 1999  (through September 30, 1999)
until November 1999.  Authority officials told us that there was insufficient qualified staff to perform the bank reconciliations on a
monthly basis.
  
Regarding the savings/checking account for the operating subsidy, we found that 66 electronic funds transfers totaling $39.4 million
for the period of January 1998 through September 1999 were appropriately deposited to the savings account but were not always
included in the Authority's financial reports submitted to HUD or appropriately recorded in the Authority's financial management
system.  Specifically, the Authority's Statement of Operating Receipts and Expenditures report for the period ending December  31,
1998, which was submitted to HUD in February 1999, showed HUD contributions totaling $22.3 million.  However, actual HUD
contributions for the period ending December 31, 1998 totaled $23.4 million, or a difference of $1.1 million.  We found that (1) the
Authority prepared the Statement of Operating Receipts and Expenditures report on the cash basis of accounting but did not include
$900,000 of HUD contributions received during fiscal year 1998 pertaining to a prior period and (2) the Authority, in February 1998,
received an electronic funds  transfer totaling $1.8 million but recorded only $1.6 million of that amount in its financial management
system, or $200,000 less than the amount received.  As a result, the Authority was not aware that the $200,000 was available for
expenditure. 
  

Regarding the passbook savings accounts for the Section 8 Program, 77 electronic funds transfers totaling $6.4 million were made for
the period of January 1998 through September 1999.  Of that amount, we reviewed 20 electronic funds transfers totaling $2.5 million,
and found that the funds were appropriately deposited to the passbook savings accounts but were not always recorded
in the Authority's financial management system.  Specifically, in January and April 1999, the Authority received two electronic funds
transfers totaling $139,158 that were not recorded in the Authority's financial management system.  Consequently, the Authority also
was not aware that the $139,158 was available for expenditure.
  
We found that the Authority did not receive a bank statement for the two passbook savings accounts and did not have the passbooks. 
Instead, the Authority relied on facsimile copies of transactions provided by the bank.  A Section 8 Program employee told us that
because of the inadequate reproduction of the transaction lists sent by facsimile, she could not always determine the accurate passbook
bank balances to transfer funds from the passbooks to the checking accounts to make payments.  As a result, the checking accounts
were sometimes overdrawn.  During our review of the Section 8 Program bank accounts, we found that the Authority incurred
overdraft charges during fiscal years 1998 and 1999 totaling $2,628 for checking accounts that were overdrawn.
  
Overtime Issues.  The Authority's Personnel Procedural Manual states, "Requests for non-emergency overtime shall be made by the
immediate supervisor and approved by the department head prior to the performance of the overtime."  In addition, the Manual states
that "non-emergency overtime not approved in advance shall be considered not authorized."  The Authority used an overtime slip to
document the request for and the approval of overtime, and time cards processed through a punch clock were used to document
employee  hours worked.  We reviewed payroll records, overtime slips, and time cards for a sample of 25 employees for five pay
periods in fiscal year 1998 and five pay periods in fiscal year 1999, for a total of 250 records, of which 28 contained overtime hours. 
We found that 3 of the 28 records containing overtime hours were processed correctly.  For the remaining 25 records, we found 7
instances where employee time cards did not reflect overtime hours worked and overtime slips
were not approved prior to the performance of overtime, 6 instances where the time cards reflected that overtime hours were worked
but for which overtime slips were not approved prior to the performance of the overtime, 4 instances where employee time cards and
overtime slips were not prepared, 4 instances where overtime slips were correctly prepared but for which time cards did not reflect that
overtime hours were worked, and 4 instances where overtime slips and employee time cards did not reflect the same number of
overtime hours.  For these 25 overtime records, we determined that the costs for unsupported overtime totaled $3,757
during fiscal years 1998 and 1999.
  
Purchase Order Logs.  The Authority provided us with the purchase order logs for St. Thomas and St. Croix for fiscal  years 1998 and
1999.  The purchase order logs listed 6,285 purchase orders totaling $11.7 million.  Based on our review, we determined that 877
additional purchase orders for an undetermined amount were not included in the logs.  Because the logs of
purchase orders were not complete, there was no assurance that all purchases were properly accounted for.   An Authority official   told
us that purchase orders processed by the financial management system for the period of June 1998 through January 1999 were lost
because of computer failures and could not be reprinted.  Furthermore, we found that the same purchase order numbers were shown on
both the St. Thomas and the St. Croix purchase order logs and that the financial management system did not have a mechanism to
distinguish between purchase orders initiated on St. Thomas and St. Croix.  In addition, because purchase order numbers were
duplicated for St. Thomas and St. Croix transactions, an Authority official told us that when purchase orders were updated, the
updated information was not always posted to the correct purchase order.  As of March 2000, the Authority was selecting a new
accounting software package to correct these issues.
  
In order to improve the Authority's administration of Federal grants, we believe that the Authority should (1) establish the practice of
canceling purchase orders in its financial management system after payment is made and stop printing duplicate copies of purchase
orders; (2) promptly reconcile all bank accounts, verify that allotments received through electronic funds transfer are appropriately
recorded in the Authority's financial management system and included in financial reports submitted to HUD, and stop using passbook
savings accounts for the Section 8 Program by closing out these accounts and establishing statement savings
accounts; (3) approve overtime requests and process overtime payments in accordance with its internal policies and procedures; and
(4) maintain accurate, current, and complete information on its financial management system regarding purchase orders and establish a
separate numbering system for purchase orders initiated on St. Thomas and St. Croix.
  
   Section 8 Program Assistance Payments
  
The Authority's Section 8 Program personnel did not always ensure that payments for housing assistance, including utility allowances,
were properly determined.  The types of income sources to be considered when making assessments as to the amount of assistance
payments for participants in the Section 8 Program are specified in 24 CFR 5.609.  Also, 24 CFR 887.361(a) contains requirements
concerning the computation of housing assistance payments, such as utility allowances.  The participants did not always receive the
correct amount of housing assistance payments because Section 8 Program personnel did not (1) consider all
sources of income when making assistance payment assessments, even though this information was available to them; (2) always
compute an allowance for utilities; and (3) use the correct worksheets to determine utility allowances, as required. 
  
Assistance Payment and Utility Allowance Computations.  In order to determine whether assistance payment assessments and utility
allowances were computed correctly, we selected a sample of 45 participants of the Section 8 Program as of September 1999.  These
45 participants received monthly housing assistance payments (including utility allowances) totaling $28,846.   Based on our review,
we determined that 6 of the 45 participants did receive incorrect housing assistance payments totaling $125 per month, or $1,500 per
year.  The incorrect payments included five underpayments totaling $94 and one overpayment of $31.
  
Regarding assistance payment assessments, we found, for example, that a participant received a monthly housing assistance payment
for the rental of a 4-bedroom unit that was $31 per month more than it should have been.  This occurred because the Authority
calculated the participant's asset income based on the $4,000 balance of one savings accounts but did not consider the   $11,000
balance in a second savings account that the participant had.
  
Regarding utility allowances, we found, for example, that although a participant's lease agreement for a 2-bedroom unit stated that
water charges were not included in the monthly rental, the Authority did not provide the participant with a utility allowance for water. 
Based on our review, we determined that the participant should have received additional assistance of $24 per month to pay   for water
utility bills.  In another example, a participant received  a utility allowance that was $22 per month less than it should have been
because the Authority erroneously calculated the allowance using a utility worksheet for fiscal year 1994 instead of the
worksheet for fiscal year 1998.
  
In order to assist the Authority's Section 8 Program personnel in determining assistance payment amounts and utility allowances, the
Authority should ensure that (1) all sources of income are reviewed when making assistance payment assessments, (2) eligible
participants receive utility allowances that are correctly computed, and (3) utility worksheets are updated and correctly used in
accordance with 24 CFR 887.361(a).
                                 
   Recommendations
  
We recommend that the Executive Director of the Virgin Islands Housing Authority:
  
1. Ensure that duplicate payments made to a contractor for vacant unit rehabilitation on St. Croix are recovered.
  
2. Establish the practice of canceling purchase orders when invoices are paid and discontinue the practice of printing duplicate
purchase orders as part of the vendor payment process.
  
3. Promptly reconcile all bank accounts, verify that allotments received through electronic funds transfers are appropriately recorded in
the Authority's financial management system and included in financial reports submitted to HUD, and change the passbook savings
accounts for the Section 8 Program to a statement savings account.
  
4. Submit to HUD an amended Statement of Operating Receipts and Expenditures report for the period ending December 31, 1998 to
reflect the $23.4 million in HUD contributions received in fiscal year 1998.
  
5. Review unsupported overtime and make appropriate adjustments for any overtime that was not worked.
  
6. Ensure that nonemergency overtime is requested and approved in accordance with the Authority's Personnel Procedural Manual.
  
7. Update the Authority's purchase order logs to reflect purchase order activity that occurred during the period of June 1998 through
January 1999 and establish a separate numbering system for purchase orders initiated on St. Thomas and St. Croix.
  
8. Require Section 8 Program personnel to include all income sources when making assessments of assistance payment amounts,
ensure that participants who are eligible for utility allowances receive the allowances in the correct amount, and use utility allowance
computation worksheets that are updated in accordance with 24 CFR 887.361(a).
  
Virgin Islands Housing Authority Response and Office of Inspector General Reply
        
In the July 26, 2000 response (Appendix 2) to the draft report from the Executive Director of the Virgin Islands Housing Authority, the
Authority expressed concurrence with all of the recommendations.  Based on the response, we consider Recommendations 1, 2, 3, 4, 5,
6, and 8 resolved and implemented and Recommendation 7 resolved but not implemented. Accordingly, the unimplemented
recommendation will be forwarded to the Assistant Secretary for Policy, Management and Budget for tracking of implementation.
  
  
  
  
Since the report's recommendations are considered resolved, no further response to the Office of Inspector General is required (see
Appendix 3).  Section 5(a) of the Inspector General Act (5 U.S.C. app. 3) requires the Office of Inspector General to list this report in
its semiannual report to the U.S. Congress.  In addition, the Office of Inspector General provides audit reports to the Congress.
  
                                Sincerely,
  
  
  
                                Roger La Rouche 
                                Acting Assistant Inspector General
                                   for Audits
                                                                                           APPENDIX 1
  
  
                   CLASSIFICATION OF MONETARY AMOUNTS
  
  
                                   Questioned Costs                 Funds To  
                                                                                                                                            Cost        Unsupported       Be Put To
          Finding                                 Exceptions*  Costs*                   Better Use*
  
  Grant Administration
       Duplicate Payments                  $145,307  
       Electronic Funds                                                                            $339,158 
       Bank Overdraft Charges                                                                      2,628 
       Overtime Charges                                                                              $3,757                                      
  
            Total                                      $145,307      $3,757                     $341,786 
  
  
  
                                                                        
                                               
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  ________
  * Amounts represent Federal funds
   APPENDIX 2 Page 1 of 5

Virgin Islands Housing Authority
Post Office Box 7668
Charlotte Amalie
St. Thomas, U.S. Virgin Islands 00801

Telephone (809) 7752741
Office of the Executive Director

July 26, 2000

Mr. Roger LaRouche
Acting Assistant Inspector General        .
for Audits
United States Department of the Interior
Office of Inspector General
Washington, DC 20240

Dear Mr. La Rouche:

Transmitted is Response to Findings on Draft Audit Report on Low Income
Housing Program Grants for the Virgin Islands Housing Authority, Assignment No.
V-IN-VIS-0 10-99-M, dated June 12, 2000.

If further information is required, please do not hesitate to let us know.

Thank you for your assistance.

Sincerely,

Conrad E. Francois, II
Executive Director

C.EF/cas

Encl.

     C:   Arnold E. VanBeverhoudt, Jr.
     Manager, Insular Areas Region Audits


 APPENDIX 2 Page 2 of 5

Virgin Islands Housing Authority     
Response to Audit Findings
Assignment No. V-IN-VIS-010-99-M (Dated June 12, 2000)

Finding #1

The following are in response to the findings as reported on Schedule of Findings.

Recommendation:

Ensure that duplicate payments made to a contractor for vacant unit rehabilitation on St.
Croix are recovered.

Response:

The Virgin Islands Housing Authority concurs with the finding and recommendation. On
October 12, 1999, the Authority notified the contractor about the duplicate payments and
demanded payment in the amount of $145,307.02. The contractor has agreed to allow the
Authority to withhold the overpaid amount from existing payables.

Finding #2

Recommendation:

Establish the practice of canceling purchase orders when invoices are paid and stop the
practice of printing duplicate purchase orders as part of the vendor payment process.

Response:

The Authority concurs with the finding and recommendation. The Authority has selected a
new accounting software package that will be Purchase Order driven. Installation of the
new software will commence within a few months.  In the interim, the Authority has
discontinued the practice of using a copy of the Purchase Order. Payments to vendors will
require Purchase Order with original signatures and new color-coded receiving report
document bearing the original signature of the contracting officer, and signed in the
appropriate area on the document by the person receiving the goods or services.

Finding #3

Recommendation:

Promptly reconcile all bank accounts, verify that allotments received through electronic
funds transfers are appropriately recorded in the Authority's financial management system
and included in financial reports submitted to HUD, and change the passbook savings
accounts for the Section 8 Program to a statement savings account.

 APPENDIX 2 Page 3 of 5

Virgin Islands Housing Authority      Page 3 of 5
Response to Audit Findings
Assignment No. V-IN-VIS-010-99-M (Dated June 12, 2ooo)

Response:

The Authority concurs with the finding, but offers the following clarification:

1. Regarding the Statement of Revenue and Expenditure submitted to HUD, a revised
report reflecting an additional $900,000.00 related to prior period was submitted to
HUD. Additionally in February 1998, subsidy of $1,800,000.00 was recorded as
Comprehensive Grant, and receipt of Comprehensive Grant of $1,589,372.00 was
recorded as subsidy resulting in an understatement of $2 11,12 1.00 of subsidy and an
over statement of Comprehensive Grant.  These transactions were corrected
December 1999 on JV#99-123.

2. Regarding two electronic fund transfers totaling $139,158.00, representing Section 8
subsidy for the months of January and April 1999, those amounts were incorrectly
recorded in cash account #1111.010 rather than the investment account #1162.00.
The corrections were made in June and September 1999.

3. Regarding the two passbook saving accounts, the Authority is in the process of
converting them to statement saving accounts.

Finding #4

Recommendation:

Submit to HUD an amended Statement of Operating Receipts and Expenditures report for
the period ending December 31, 1998, to reflect the $23.4 million in HUD contributions
received in fiscal year 1998.

Response:

The Authority concurs with the finding and recommendation. An amended Statement of
Operating Receipts and Expenditures reflecting the correct amount of subsidy received for
the period ending December 3 1, 1998 is presently being prepared for submission to HUD.

Finding #5

Recommendation:

Review unsupported overtime and make appropriate adjustments for any overtime that was
not worked.
 APPENDIX 2 Page 4 of 5

Virgin Islands Housing Authority
Response to Audit Findings

Assignment No. V-IN-VIS-010-99-M (Dated June 12,200O)

Response:

The Authority concurs with the finding and recommendation.  The Office of the
Comptroller is currently reviewing supporting documentation for overtime paid to
individuals cited in the audit. Upon completion of the review, appropriate actions will be
taken.

Finding #6

Recommendation:

Ensure that non-emergency overtime is requested and approved in accordance with the
Authority's Personnel Procedural Manual.

Response:

The Authority concurs with the finding and recommendation. On July 25, 2000, a
memorandum was sent to all department heads informing them of the requirement of the
Authority's Personnel Procedural Manual as it pertains to non-emergency overtime work.

The Authority will effectively control overtime payment to employees as stated in the
Personnel Procedural Manual.  All requests for non-emergency overtime will require
approval by the immediate supervisor and approved by the department director prior to the
performance of the overtime.

Finding #7

Recommendation:

Update the Authority's Purchase Order logs to reflect activity during the period of June
1998 through January 1999 and establish a separate numbering system for Purchase Orders
initiated on St. Thomas and St. Croix.

Response:

The Authority concurs with the finding, but offers the following clarification:

1. Hard copies of the Purchase Orders, including the Purchase Orders missing from the
electronic Purchase Order log are on file in the Authority's Office of Procurement.
These Purchase Orders are being used as source documents to complete the log.

2. All missing Purchase Orders are currently being reentered. The electronic Purchase
order log will be completely updated by September 30, 2000.
 APPENDIX 2 Page 5 of 5

Virgin Islands Housing Authority
Response to Audit Findings

Assignment No. V-IN-VIS-010-99-M (Dated June 12,200O)

3. The Authority has selected a new accounting software package. Installation of the
new software will commence early September 2000 to be completed within a year.
The new software will correct all the deficiencies cited in the existing software.

Finding #8

Recommendation:

Require Section 8 Program personnel to include all income sources when making
assessments of eligibility, ensure that participants who are eligible for utility allowances
receive the allowances in the accordance with 24 CFR 887.361(a).

Response:

Section 8 personnel have reviewed the files and are in the process of recalculating utility
allowances.

The Authority will review its files to ensure that all sources of income are reviewed when
determining eligibility for continued participation under the Section 8 program, and that
accurate utility allowances are computed as appropriate. The Utility Schedules will be
updated as required by HUD to ensure that all participants who are eligible for utility
allowance receive the allowance in the correct amount.



                                         

  
                                 
        
  
  
  
                                                                                       APPENDIX 3
  
  
                    STATUS OF AUDIT REPORT RECOMMENDATIONS
                                 
  
  
  Finding/Recommendation
                                                                 Reference                Status                   Action Required            
  
                                                    1, 2, 3, 4, 5, 6, and 8          Implemented    No further action is required.
  
                                        7              Resolved;      No further response to the Office of
                                                  not       Inspector General is required.  The
                                                       implemented    recommendation will be referred to the
                                                            Assistant Secretary for Policy,
                              Managment and Budget for tracking of
                                                            implementation.  However,
                                                            documentation regarding completion of
                                                            the electronic purchase order log and the
                              installation of the new accounting
                                                            software should be provided to our
                                                            office.