JMHA coming under HUD scrutiny
STEUBENVILLE — Findings in an audit conducted by the U.S. Housing and Urban Development Inspector General that looked into the operations of the Jefferson Metropolitan Housing Authority have led to a recommendation the local housing authority reimburse the federal agency $964,000 from nonfederal funds for unsupported procurement and contracting activities.
“The authority is at risk of defaulting on its nearly $6 million energy conservation loan, thus potentially encumbering public housing properties,” cited a report released Aug. 3.
The federal report is set to be discussed during Wednesday meeting of the JMHA board of commissioners.
According to the audit, “The authority failed to maintain adequate documentation to support its procurements and ensure there were no real or apparent conflicts of interest in its contracting process. Additionally, it failed to achieve the expected savings on its energy improvements. These weaknesses occurred because the authority lacked adequate procedures and controls to ensure it complied with HUD’s and its own procurement requirements and a sufficient understanding of HUD’s requirements for the administration of its energy contract.”
The inspector general’s report said eight of 11 authority-procured contracts reviewed by the federal auditors were missing pertinent procurement documentation.
“Specifically, the authority’s contract files were missing evidence the authority obtained the accurate number of proposals when using the small purchase method and sought appropriate competition for five contracts. In addition, the authority did not prepare independent cost estimates, maintain copies of proposals or appropriately follow the sealed bid procurement method for three contracts over its small purchase threshold of $50,000,” according to the report.
Debbie Bailey, who was appointed interim executive director of the JMHA at the July 27 board meeting, said she is searching for the appropriate documentation for the HUD auditors.
“Offices were moved and records were moved, but I feel comfortable we will find the documentation. I am working with the HUD Cleveland office and hope to locate the records they are talking about,” Bailey told the Herald-Star.
“Former JMHA Executive Director Joe Costantini and former Finance Director Jim Fullen have volunteered to come in and help me locate some of the records we need. We are in the process of reviewing everything and I have included a copy of the audit in the board members packets for the Wednesday meeting,” added Bailey.
The report noted a board member “had a business and personal relationship with at least one of the authority’s contractors.”
“The winning energy service contractor used the services of this contractor as a sub-contractor to implement the authority’s energy contract. We reviewed documentation in relation to the board member’s voting on contracts for that contractor without disclosing details of the relationship to the board or abstaining from the voting process. According to the authority’s procurement policy, no employee, officer, board member or agent of the authority should participate directly or indirectly in the selection, award or administration of any contract if a conflict of interest, either real or apparent, would be involved,” reported the federal auditors.
A spokesman for the inspector general said his office “wouldn’t release any more details with regard to identity other than what is contained in the report.”
The JMHA board awarded a $2 million energy audit contract to the Tenth Avenue Group in a split vote at a July 2012 board meeting.
Commissioners Les Zapor, David Hindman and Gerald DiLoreto favored the Aliquippa, Pa., company, while commissioners Rue Mitchell and Charles Lewis voted in favor of the Honeywell Group. Zapor is no longer a member of the board.
The audit stated HUD disagreed with the JMHA’s monitoring and verification reports for calendar years 2014 and 2015, which stated the authority had achieved the estimated energy savings.
“According to HUD, the authority was spending more for utility consumption than it was before the energy savings equipment was installed,” it was noted the report.
The audit listed five recommendations including:
¯ Support or reimbursement of $964,365 from nonfederal funds for the unsupported procurement and contracting cited in the finding;
¯ An update of the authority’s expected energy savings, including change orders, and to provide supporting documentation to HUD for approval to ensure the remaining contract amount is appropriately approved;
¯ Working with HUD to develop a plan to ensure the energy savings are realized to prevent a potential default on the $5,869,770 energy conservation loan used to purchase energy conservation equipment attached to the authority’s public housing properties;
¯ Implementation of adequate procedures and controls to ensure procurements are appropriately managed, adequate documentation is maintained to support the significant history of its procurements and adequate competition is sought for all procurements; and,
¯ Implementation of adequate procedures and controls to ensure the authority follows HUD’s and its own conflict of interest requirements related to procurements. Such procedures should include, but not be limited to, selecting contractors based on open and free competition and ensuring real or apparent conflicts of interest do not exist or are appropriately mitigated.
Questions regarding the audit were referred by the Cleveland HUD office to the Chicago office. A spokesman from the Chicago office said officials there are reviewing the audit and the results are not available.
The Wednesday board meeting will be the first session of the commissioners since a private Friday meeting that included four of the board members as well as the government appointing entities; U.S. Rep. Bill Johnson, R-Marietta; and officials from the Cleveland office.
Hindman resigned his seat on the JMHA board after that meeting and in a prepared statement urged his colleagues to resign.
“We sought guidance from our appointers and legal counsel in attempting to get our board unified as a whole again. After being unsuccessful in our numerous attempts to unify our board, it has been highly suggested by our board advisers and legal team that the entire JMHA board should consider stepping down and replace the board with a fresh and unified vision for JMHA. My hope is that the four remaining JMHA board members would follow my lead and take the legal team’s advice and selflessly step aside for the love of JMHA and our community,” Hindman said.
(Gossett can be contacted at dgossett@heraldstaronline.com.)
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