Purpose

To assess the effectiveness of the Division of Housing and Community Renewal’s administration of Public Housing Modernization Program (Program) funds awarded to selected public housing authorities located outside of New York City. Our audit scope covered the period December 1, 2007 through January 4, 2016.

Background

The Division of Housing and Community Renewal (DHCR) is responsible for the supervision, maintenance, and development of affordable low- and moderate-income housing in New York State. The Housing Trust Fund Corporation (HTFC), a public benefit corporation, provides loans and grants to finance the construction, development, revitalization, and preservation of affordable housing for low-income individuals and families. The Public Housing Modernization Program (Program), administered by DHCR in conjunction with HTFC, provides grants to public housing authorities (authorities) to be used for major repairs, such as replacing or repairing roofs; improving heating systems, plumbing, and ventilation systems; renovating elevators; and modernizing bathrooms and kitchens. DHCR is responsible for awarding Program funds to authorities and providing general Program oversight, while HTFC disburses the Program funds pursuant to “funding contracts” between DHCR and the recipient authority.

Between fiscal 2007 and 2013, 35 funding contracts, totaling $44 million, were awarded to authorities located outside of New York City. For Program purposes, funded projects are classified into two categories: restructured (where the authority has already partnered up with a consultant to oversee the funded project, as well as a construction contractor, and will be receiving funding from multiple sources); and non-restructured (where DHCR officials oversee the authorities’ selection of consultants and construction contractors). For both project categories, DHCR officials are responsible for ensuring the specified work was performed in a quality manner before approving the final payment on its various funding contracts.

Key Findings

We identified several significant deficiencies regarding the expenditure of Program monies. These deficiencies include:

• Long delays in the award of construction contracts, resulting in corresponding delays in project completion. For example, funding for a project in Kingston was approved in August 2002 for $300,000. However, the first construction contract ($16,500 for electrical work) was not awarded until February 2011 – eight and a half years after funding was first made available;
• Questionable contractor selection practices at a non-restructured project (Greenburgh) and undocumented DHCR evaluations of the consultants and contractors chosen for three restructured projects;
• Questionable change orders for items that should have been competitively procured, could have been avoided with better planning, or were not adequately justified by available documentation; and
• Two projects for which final payments of $136,538 were made without the required Certificates of Completion or independent DHCR final inspections.

Key Recommendations

Ensure that housing authorities award consultant and construction contracts on a timely basis, once funding contracts are executed. Establish time frames to award these contracts, specific to the nature and scope of the work to be performed.

• Review the questionable bidding practices observed at Greenburgh and determine whether appropriate procedures were used in the contractor selection process. Enhance and document DHCR oversight of the consultants and construction contractors chosen by housing authorities for restructured projects.
• Ensure that Program funding recipients use change orders appropriately. In particular, ensure that change orders are used only for work within the scope of projects and not to circumvent competitive procurement processes.
• Ensure that housing authorities submit Certificates of Completion and that DHCR staff inspect projects prior to authorizing final project payments.

Agency Response to Audit

In their response to the draft audit report, DHCR officials disagreed with our observations and conclusions and appeared to question the need for our recommendations. In general, their response is dismissive and argumentative. We are disappointed that DHCR officials did not perceive the report as an opportunity to improve Public Housing Modernization Program administration, including better project management.

Other Related Audit/Report of Interest

Division of Housing and Community Renewal: Oversight and Monitoring of the Public Housing Modernization Program at the New York City Housing Authority (2014-S-21)