Audit Report on the Administration of Resident Employment Program by the New York City Housing Authority

AUDIT REPORT IN BRIEF

This audit determined whether the New York City Housing Authority (NYCHA) has effective controls to ensure that the Resident Employment Program (REP) is operating as intended. NYCHA’s mission is to provide decent and affordable housing for low- and moderate-income residents throughout the five boroughs. The NYCHA Department for Resident Employment Services (RES) administers the agency’s Resident Employment Training Programs, which include REP.

REP requires contractors for NYCHA construction contracts valued at $500,000 or more to expend not less than 15 percent of the total labor cost, including fringe benefits, for the hiring of NYCHA residents. NYCHA’s Fiscal Year 2004 capital budget for construction projects is $556,232,000.

NYCHA generally does not have effective controls to ensure that REP is operating as intended. Specifically, NYCHA management has not developed any formal procedures for the program and has not coordinated the efforts of RES and the administering departments in monitoring contractor compliance with REP. As a result, those persons charged with monitoring contractor compliance do not have a clear understanding of their responsibilities, and no one is held accountable for ensuring that contractors provide accurate information regarding resident hiring.

Our review of a sample of 33 contracts revealed that contractors submitted the required REP hiring summaries for only 236 (55%) of the 433 payment packages reviewed. Additionally, only 137 (74%) of 185 persons identified as resident hires by contractors for those 33 contracts were in fact legal residents. Our review of a sub-sample of nine contracts revealed that 45 (58%) of the 78 hiring summaries we analyzed were not supported by the payroll records, and 34 (44%) of them overstated the amounts paid to hired residents by 28 percent. Overall, only eight percent of the labor expenditures for these contracts was paid to resident hires, according to payroll records obtained by NYCHA.

We recognize that NYCHA’s intent in implementing REP was to enforce the mission of the Section 3 Program and hold contractors accountable for allocating a mandatory percentage of funds for the hiring of NYCHA residents. NYCHA officials also stated that the agency was aware of many of the problems we identified in this audit. Officials also cited the displacement of staff and records following the September 11, 2001, attack on the World Trade Center as a factor that hindered contractor monitoring. During the course of the audit, management instituted some program changes designed to improve accountability. However, much remains to be done. Until effective accountability is achieved, NYCHA will be hindered in its efforts to ensure that residents are provided employment opportunities in its capital construction projects.

We make six recommendations to NYCHA. NYCHA should:

• Design and issue a formal written procedures manual for REP. The procedures should clearly define the responsibilities of all parties involved in REP and document the internal controls and milestones that management has developed to help ensure that the program’s objectives are achieved.
• Coordinate the efforts of the RES and the administering departments to ensure that materials are transmitted in a timely manner and that all parties know their respective roles in the administration of REP and the steps to take regarding noncompliant contractors.
• Ensure that specialists use the correct criterion—the percentage of total labor costs that are paid to NYCHA residents—to evaluate contractor compliance with REP hiring requirements.
• Develop an accurate listing of all contracts participating in REP.
• Institute better controls to verify that NYCHA residents whom the contractors reportedly hire are actually on the job and working.
• Reconcile the residency-hiring information recorded in the Section 3 and contractor history report databases so that the information in both databases agrees and is accurate.