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Local Housing Authority Board Member Training

Script for Module Four: Capital Projects and Bidding

PLEASE NOTE: This guide is an accessible resource to aid the completion of the training online. It does not replace taking and completing the course online. The course is located at https://lhaboardtraining.umassonline.net and must be completed there to be in compliance.

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Module Four: Capital Projects and Bidding

Module Four: Capital Projects and Bidding

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This training has an audio component. Please listen to the narration with computer speakers or headphones. If you are in a public setting, please use headphones as a courtesy to your neighbors. Thank you.

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Slide 1: Welcome to Module Four

Welcome to module 4.

In this module, we will discuss how state public housing gets physically modernized beyond the routine day-to-day maintenance explained in Module 3.

First, we will define what capital projects are and explain how they are funded.

Next, we will explain how capital planning works, including capital needs assessments and how to prioritize those needs.

Then, we will explain how to administer capital projects and the procurement requirements.

Finally, we discuss the Board’s role in preventing fraud, waste and abuse.

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Slide 2: Module Four has four Lessons

This course should take approximately 50 minutes to complete and is divided into four lessons:

1. Overview 2. Capital Planning 3. Capital Projects 4. Bidding, Purchasing and Fraud Awareness

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Slide 3: Learning Objectives for Module Four

By the end of the module, you should be able to:

Describe the difference between capital and routine maintenance projects

Identify the sources of funding for capital projects

Explain the tools of capital planning, including o capital needs assessment, or CNA o capital improvement planning, or CIP o and the capital planning system, or CPS;

Prioritize capital needs projects and their funding

Understand bidding and procurement requirements, including the Board’s role in them

And recognize and correct for fraud, waste and abuse.

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But, before we begin, we want to say a big THANK YOU once again for your leadership and commitment, and for your service to your housing authority and your community.

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Lesson One: Overview of Capital Projects

Lesson 1: Overview of Capital Projects

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Slide 4: What are Capital Projects?

What are capital projects? Capital projects are either new construction or renovation projects. Renovations can also be called modernization projects. Capital renovation projects have these four characteristics:

They go beyond the scope of routine maintenance.

They repair and prolong the useful life of the asset.

Capital projects preserve assets and add value to them.

Finally, capital projects typically cost more than $1,000.

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Slide 5: Capital Projects

DHCD has not funded much new public housing since the 1980s, so today, most state-funded capital projects are renovations -- modernization of existing sites.

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Slide 6: DHCD's Capital Planning System

What data does DHCD use to approve and fund capital projects? DHCD’s Capital Planning System, or CPS, is a tool DHCD uses to determine the state-aided public housing portfolio’s needs and to determine funding allocations for capital improvements. It is a web-based software system that all housing authorities have access to and are required to use.

CPS contains an inventory of the condition of key components in every Housing Authority building and site.

Components are things like roofs, heating systems, appliances, etc.: anything that requires ongoing maintenance and repair.

When deficiencies are found during inspections and assessments, they are entered and tracked in CPS. Similarly, when a project is completed, the newly installed components get updated in CPS.

CPS helps DHCD and LHAs see the big picture and understand what needs to be fixed and when.

CPS helps DHCD and LHAs see the big picture and understand what needs to be fixed and when.

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Slide 7: DHCD's CPS Continued

CPS is important because DHCD uses it to determine the capital needs and corresponding funding strategies for preserving the state public housing portfolio.

CPS is the basis for the formula DHCD uses to determine the amount of capital funds each LHA gets annually through the Formula Funding program.

LHAs make capital improvement plans based on the capital funds awarded through Formula Funding and then implement capital projects.

As a result, you can see it is very important that the information in CPS is accurate. LHAs are responsible for maintaining the accuracy of their CPS data. Every five years, DHCD does a capital needs assessment to audit and correct CPS.

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Slide 8: Typical Capital Projects

Here are some typical capital projects that LHAs undertake:

Roofs

Siding

Windows

Heating system

Roadway and parking lot paving

Tree removal

Modernization of kitchen and baths

Unit turnover of apartments requiring major renovation

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Slide 9: Differentiating Between Capital and Operating Projects:

Example 1

Let’s consider two projects and see which one would count as a capital project.

The project on the left will replace the flooring in the entry of one of your LHA’s buildings; the project on the right is to replace flooring in all common areas.

Our definition of a capital project is that it must go beyond the scope of routine maintenance. Replacing the floor in one building’s entryway might fall under routine maintenance, depending on the size of the area.

A capital project repairs, prolongs, preserves, and adds value to existing assets; both of our projects meet that requirement, too.

And finally, a capital project usually costs more than $1,000. Replacing all the flooring would certainly cost more than $1,000, but the flooring for one building’s entrance probably would not.

In this example, scale and cost are the defining factors that make the project on the left – replacing flooring in an entryway- an operating project and make the project on the right a capital project.

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Slide 10: Example 2

What is the difference in determining whether a project should be funded by capital or operating funds? Remember that for it to be a capital expense, it must replace a building system as opposed to just repair a part of a system which would be an operating expense, and would be paid for out of the LHA’s operating budget.

Let’s look at some examples. On the left, replacing a section of pipe on an air conditioner is an operating expense. On the right, replacing an HVAC system for a building is a capital expense. Replacing a whole roof is a capital expense. Patching a roof is an operating expense.

Similarly, replacing all siding is a capital expense, but spot replacing damaged siding is an operating one. And repointing an entire brick building would be a capital expense, but spot repointing would be an operating one.

A combination of these smaller projects however may be deemed a capital project.

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Slide 11: How are Capital Projects funded?

Now that we know the difference between capital and operating projects, let’s look at how capital projects are funded. There are three main funding sources:

Bond Funds are administered by DHCD and awarded to LHAs.

Operating Reserves is a term we’ve talked about before; it refers to the amounts in an LHA’s available cash on hand in excess of 20% of its full reserve level. Housing authorities may use these funds to pay for capital projects.

Capital projects can also be funded with grants or funds from other local, state, or federal agencies and programs, such as:

Community Preservation Act (CPA)

Community Development Block Grants (CDBG)

HOME funds

Utility-funded energy efficiency rebates and programs

Let’s look at each of these in more detail.

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Slide 12: Bond Funds

Where do Bond Funds come from?

LHA capital spending is primarily funded from the proceeds of bonds issued by the Commonwealth.

Every five years, the state government passes bond authorization bills, or housing bond bills.

Every year, DHCD receives a capital budget from the Executive Office of Administration and Finance, called its “bond cap.”

DHCD uses this funding authorization to fund capital projects at LHAs.

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Slide 13: The Bond Cap

Where do Bond Funds come from?

LHA capital spending is primarily funded from the proceeds of bonds issued by the Commonwealth.

Every five years, the state government passes bond authorization bills, or housing bond bills.

Every year, DHCD receives a capital budget from the Executive Office of Administration and Finance, called its “bond cap.”

DHCD uses this funding authorization to fund capital projects at LHAs.

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Slide 14: How is the Bond Cap Allocated?

With limited funds, here is how DHCD chose to allocate the $90 million bond cap for State Fiscal Year 2016 for state-aided public housing:

$50 million went to the Formula Funding Program;

$25 million went to targeted initiatives.

$6 million went to Emergency and Code Compliance projects; and

$9 million went to DHCD administration costs and RCAT.

Let’s look further into each of the three areas of bond funding.

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Slide 15: DHCD's Formula Funding

Formula Funding is the primary source of funds for capital projects. Every LHA that operates state-aided public housing gets a share of Formula Funding,

Annually, DHCD awards the formula funding for three years out into the future. With 3 years of funding, the LHA can then plan ahead, since many projects may take more than one year to design, bid, and execute.

Each Formula Funding share is based solely on the conditions of the LHA recorded in the CPS, as compared to LHAs statewide.

Recently, the average annual Formula funding award is $1,200 per unit… which breaks down to meeting only five cents for every dollar of need.

Because resources are limited, LHAs have to carefully prioritize their projects.

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Slide 16: Formula Funding Example

The annual Formula Funding award is calculated by dividing the LHA’s need by the entire state portfolio’s need. That result is multiplied by the total funds available — currently 50 million dollars.

For example, if an LHA needs $2 million, and the entire state portfolio needs $1 billion, that LHA would get .2% of the funds available. With $50 million available, the LHA would get $100,000.

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Slide 17: Special Initiatives

Fortunately, Formula Funding is not the only resource available. What about those targeted initiatives we mentioned? In 2016, the state allocated $25 million to Special Initiatives that address specific, acute needs at a limited number of developments.

For example,

The Sustainability Program funds renewable technology, low flow toilets, and energy efficient appliances.

Vacant Unit Initiatives fund re-occupancy of chronically vacant units that need major repair or reprogramming.

In the High Leverage Asset Preservation Program, or HiLAPP, DHCD awards grants in a competitive process to LHAs that are able to secure matching funds from their city, town, or low-income housing tax credit funds to improve conditions at developments with very high capital needs.

These programs are promoted through Public Housing Notices or direct outreach. Some are awarded through competitive applications.

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Slide 17: Emergency and Compliance Reserve

DHCD also maintains two reserve funds: the Emergency Reserve and the Compliance Reserve.

DHCD grants these funds when LHAs have to do unexpected emergency and compliance projects.

DHCD Emergency Reserve Funds are used as a last resort to cover unexpected and urgent projects such as a septic system failure or an actively leaking roof. In order to receive emergency funds, LHAs must contribute any formula funding not already allocated to urgent projects, plus any operating reserves over 70% of the full reserve.

The Compliance Reserve provides funds for projects required to comply with laws, codes, or regulations such as the installation of a wheel-chair accessible ramp. In order to receive compliance reserve funds, LHAs must contribute the portion of their formula funding that is set aside for Americans with Disabilities Act (or ADA) projects to the compliance project, plus any operating reserves over 70% of the full reserve.

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Slide 19: Contracts for Financial Assistance

We’ve looked at the three ways funds are allocated:

Formula Funding, Emergency and Compliance Reserves, and Targeted Initiatives.

How are these funds transferred to your LHA?

Each LHA has a Contract for Financial Assistance, or CFA, that is executed with DHCD. It outlines the rules and limitations of how your LHA spends capital bond funds. The CFA gets amended when DHCD awards new funds.

The Board must approve all CFAs and their amendments.

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Slide 20: Operating Reserves: Owned by the LHA

In addition to bond funds, capital projects may be funded by operating reserves. In Module 3, we learned about the ANUEL, or Allowable Non-Utility Expense Level. It’s a budgeting tool that each LHA uses.

When your LHA spends less than its ANUEL, the money left over goes into an operating reserve.

Operating reserves can fund extraordinary maintenance, deferred maintenance, and capital projects. Operating reserves can be used for other operating costs, please see the Budget Guideline currently in effect. It is available as a public housing notice.

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Slide 21: Operating Reserves: Requirements

The maximum allowed operating reserve is half of your ANUEL.

DHCD expects LHAs to maintain at least 20% of the maximum allowed.

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Slide 22: Operating Reserves: Calculated

Let’s look at how your LHA’s operating reserve is calculated.

Half of your LHA’s ANUEL is the LHA’s full operating reserve. LHAs are expected to have a full operating reserve, however, with limited funding, it is not always possible. 20% of the full operating reserve is the minimum required operating reserve. Your LHA should always have that much on hand in case of emergencies.

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Slide 23: Operating Reserves: The Board’s Role

What is the Board’s role in respect to the operating reserve?

The Board regularly monitors the balance in the LHA’s operating reserve against DHCD standards.

The Board considers the operating reserve to be one of the tools available to address extraordinary maintenance, deferred maintenance, and capital needs.

Board members should note that their LHA may fund a capital project in whole or in part from excess operating reserves that are above the 20% minimum required level.

If you need additional information on operating reserves, please go back to Module 3.

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Slide 24: Other/Leveraged Funds

DHCD strongly encourages LHAs to seek additional sources of funding to supplement its own and DHCD’s resources.

LHAs may pursue grants from the Federal or state government, such as

Massachusetts energy efficiency grants or HUD grants.

There are local funds administered by cities and towns, such as Community Preservation Act funds, Affordable Housing Trust Funds, Community Development Block Grants, and HOME Investment Partnership Program Funds.

And there are private grants available through philanthropic organizations and individual donors.

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Slide 25: Who makes capital projects happen?

What makes a capital project happen? First, a problem has to be identified. Anyone at the LHA might do this – staff, board members, or residents. .…

In addition, there are three Regional Capital Assistance Teams, or RCATs, to help smaller LHAs identify and complete capital projects.

The RCAT program, which was required by legislation, began in 2016. These RCATs assist smaller housing authorities with capital and maintenance planning, project management, securing funds, and collaborating on bulk procurement and purchasing.

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Slide 26: Regional Capital Assistance Teams (RCATs)

DHCD has contracted with 3 housing authorities to act as host housing authorities for the RCAT program. They are distributed regionally. There is 1 for western and central Massachusetts and then 1 more in each of the northeast and southeastern regions of the Commonwealth. All LHAs with fewer than 500 state-aided public housing units are required to participate in the RCAT program, unless granted a waiver by DHCD in specific, well-defined circumstances.

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Lesson One Knowledge Checks (answers are at the end of this

document)

1. Please check all that apply: Which of the following projects are capital

projects?

a. Replacing all the windows in a 20-unit building

b. Repairing the stove in a resident’s apartment

c. Removing graffiti from one side of a building and then re-

painting

the area

d. Removing all incandescent common hallway lighting and

replacing it with energy efficient LED lighting.

2. Choose the correct answer. Operating Reserves can be used for:

a. Extraordinary maintenance, deferred maintenance and support of

capital projects

b. Routine, day-to-day maintenance only

3. True or False: Bond Funds are administered by the local municipality

4. True or False: All LHAs with state-aidmed public housing receive a share

of the Bond Funds through Formula Funding.

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Lesson Two: Capital Planning

Lesson Two: Capital Planning

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Slide 27: What is capital planning?

Now that you know what a capital project is, we can talk about capital planning.

Capital planning is a strategy for matching available and projected resources to both current and future capital needs.

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Slide 28: What are the key elements in capital planning?

Capital planning requires the LHA to balance projected needs with the resources available to address those needs. As you’ve seen, needs usually far outweigh resources, so that is a challenge.

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Slide 29: The capital planning cycle

Capital planning is an ongoing cycle at every LHA. As projects are completed, new ones take their place, based on their priority.

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Slide 30: Annual steps in capital planning

There are nine basic steps to capital planning.

First, the LHA assesses its capital needs and updates the online Capital Planning System. Next, it scopes the projects and determines the priority of each and identifies available funding. Then the LHA drafts a five-year Capital Improvement Plan, or CIP, that matches the 5 years of projects with 5 years of projected resources. Residents must be given opportunity to provide input on the CIP. The Board approves the five-year CIP and then the LHA submits it to DHCD; DHCD reviews and approves it if there are no required revisions. Only after DHCD has approved the CIP can the projects for that year begin.

Let’s take a look at how all that works in more detail.

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Slide 31: Conduct an annual needs assessment

“The first stages of capital planning require a review of all site conditions, this is called a Capital Needs Assessment (or CNA). LHAs should use the CPS Condition Assessment form to record findings. Usually, the CNA happens at the same as annual inspections. Some LHAs engage the RCAT or hire a consultant to undertake this assessment.

Once the site assessment is complete, the results are entered into CPS, capturing any new deficiencies or existing conditions that have worsened.”

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Slide 32: Scope the Project

After deficiencies have been identified and recorded in CPS, the LHA staff must create clear limits, a budget and schedule for the projects, in order to determine which projects to do next.

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Slide 33: Plan and identify funding for capital projects

Next, the LHA must identify available resources. Consider all of the potential funding sources we talked about in section 1 of this module.

In addition to Formula Funding, can your LHA apply for sustainability grants or other DHCD initiatives? Is there funding available from your town or city? Are there other grants that the LHA can pursue? Does your LHA have operating reserves in excess of 20% of the maximum?

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Slide 34: Prioritize capital projects

Next the LHA prioritizes the identified projects. As we have already discussed, unfortunately there is never enough money to do all the projects, so the LHA staff must use good judgement in determining which projects to tackle first.

DHCD categorizes projects by urgency, as follows:

1. Address health, safety, and code violations. 2. Maintain core operational systems such as heating or water systems. 3. Keep all units occupied. 4. Optimize life cycle investments, including using maintenance

strategies to extend useful life.

Prioritizing projects is important to saving money and maximizing operations. If your LHA isn’t sure how to prioritize, staff can call their RCAT or PM at DHCD.

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Slide 35: Prepare a Five-Year Capital Improvement Plan

Once you’ve prioritized your capital projects and you have a sense of the available funding, you can begin writing your Capital Improvement Plan or CIP. One of the important ingredients is to get the feedback of your tenants. Develop a schedule to engage residents in the CIP planning process.

Residents may review a draft CIP at a Board meeting or in a meeting with the Executive Director

If you have a Local Tenant Organization, the LTO should provide written feedback on the CIP. This document should be included in the CIP, when the Executive Director submits it to DHCD.

The CIP should incorporate tenant priorities that are consistent with sound management and funding availability.

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Slide 36: Role of the Board in the CIP

Let’s talk about the roles of the ED, staff and Board in the CIP process:

Every year, the LHA must submit an updated five-year CIP. It is due 15 days after the end of the LHA’s fiscal year. The ED and Staff prepare and submit the CIP, incorporating tenant feedback.

The Board must approve the CIP prior to its annual submission to DHCD.

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Slide 37: 5-Year CIP Example

Here’s a summary page of a sample CIP. It includes nine capital projects to be completed over five years. Notice, as it is typical for most LHAs, the majority of projects are paid for by Formula Funding.

It is worth noting that this LHA has been successful securing other funds. These funds have expanded the number of projects that the LHA can pursue.

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Slide 38: 5-YEAR CIP: Mid Year Revisions

The 5-year CIP is not set in stone. It can change. The LHA should revise it as the needs and resources change.

Generally, revisions are made at the time of the annual submission, but they can also be made any time it is needed. A revision would be necessary if an LHA wants work on a project that was not in the plan for that year. If revisions are made, DHCD must approve them. And if the revisions are substantial, the LHA must engage with the LTO and tenants.

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Slide 39: Capital Performance Benchmarks

You’ll remember the concept of benchmarks from other modules.

Benchmarks that demonstrate good capital project management include:

Submitting your LHA’s CIP on time.

Utilizing at least 80% of your awarded Formula Funding over a three-year period.

If you can secure funds in addition to Formula Funding, that is wonderful!

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Lesson 2 Knowledge Checks (answers are at the end of this document)

5. Please choose the best answer: Capital needs assessments are

conducted by: The LHA

a. An independent contractor

b. A regional capital assistance team (RCAT)

c. Any of the above

6. Choose the best answer: Capital Improvement Plans (CIPs) are

approved by: a. The Staff

b. The Board

c. The Residents

d. DHCD

e. Only b and d

7. True or False: Projects identified on the CIP are limited by funding

availability.

8. True or False: It’s ok for LHAs to submit their capital plan late and not

spend their Formula Funding.

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Lesson Three: Administering Capital Projects

Lesson 3: Administering Capital Projects

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Slide 39: Rules and Standards for Capital Projects

You’ve assessed your LHA’s needs, compiled the CIP, and DHCD has approved the start of this year’s projects. It’s time to actually get something done!

Remember that work cannot begin until DHCD has approved the CIP and that work should be done in the year it is planned for. Diversions from the plan require a revision of the CIP.

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Slide 40: Capital Projects: Small

Who is involved in accomplishing capital projects varies, depending on the size of the project.

Small projects, which are less than $50,000 in estimated construction costs, are executed by the LHA with very little DHCD involvement. Please keep in mind that it is the construction cost of the project that must be under $50,000, not including design fees or other soft costs.

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Slide 41: Capital Projects: Large

Projects with construction costs over $50,000 are more complex, and so

DHCD staff oversees the design, bidding, and construction processes.

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Slide 42: LHA costs on capital projects

An LHA may request DHCD approval to pay its own staff through Formula Funding in situations where:

1) LHA staff have used work hours to do administrative tasks associated with capital projects or CIP; OR

2) LHA has a skilled tradesperson on staff who is qualified to do a construction project in-house. Projects done by in-house staff, usually maintenance employees, are commonly called “Force Account” projects, because they are implemented using the LHA’s own forces.

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Slide 43: Staff: Administration

Regarding Administration Fees….

With DHCD approval, an LHA may use Formula funding to cover administrative costs on a project equal to up to 10% of the construction cost.

For instance, if an LHA does a $20,000 window project, it can use $2,000 of Formula Funding for administrative costs.

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Slide 44: Staff: Labor for Capital Projects

If DHCD approves a Force Account project, the LHA must keep careful records.

DHCD must approve the budget, with labor costs clearly defined;

Force account wages must match regular hourly rates for each employee.

Capital bond funds cannot be used to pay staff retirement cost benefits.

Any salary offsets in the operating budget must be used to fund other maintenance or extraordinary maintenance costs.

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Lesson 3 Knowledge Checks (answers are at the end of this document)

9. True or False: LHAs can begin a capital project as soon as they have

submitted their CIP to DHCD.

10. True or False: LHAs can use their own staff as labor on a capital

project.

11. Choose the best answer: Capital projects should be completed…

a. In the year planned

b. Within three years of the year planned

c. As soon as possible

12. Choose the best answer: A large capital project:

a. Has a minimum of $10,000 in construction costs

b. Requires little DHCD oversight in design, bidding and

construction

c. both a and b

d. neither a nor b

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Lesson Four: Bidding, Purchasing and Fraud Awareness

Lesson 4: Bidding, Purchasing and Fraud Awareness

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Slide 45: What are Procurement and Bidding?

To learn how best to spend funds for capital improvement, we need to become familiar with some specific vocabulary. What do procurement and bidding mean exactly?

“Procurement” is the process by which an LHA buys or hires contractors, supplies, and services for capital projects, maintenance, and other operations. These transactions must follow the procurement laws and regulations of the state. Because your LHA is a public agency, it can’t just contract with whomever it wants, it must follow a specific process.

Bidding is one of the steps in procurement. During “Bidding,” vendors and contractors compete for an LHA contract. Bidding is meant to give LHAs the best quality products or services for the value.

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Slide 46: Goals of Procurement Law

There are laws that rule the procurement process. These laws:

Promote competition and fairness when public agencies are contracting with vendors;

Save money;

Promote integrity and public confidence in government; and

Enable local government bodies to devote more attention to large and complicated contracts.

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Slide 47: Procurement: The Board’s Role

The Board has two types of responsibility in procurement:

Oversight responsibility, to make sure the LHA complies with all laws and regulations; and

Fiduciary responsibility, to make sure the LHA is properly using and accounting for its funds.

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Slide 48: LHA Procurement Basics

The Board meets its responsibility with the help of a policy and a person.

Each LHA must adopt a procurement policy, and review it annually.

Each LHA must designate a Chief Procurement Officer, or CPO. This is usually the Executive Director, or someone who has training and experience in public procurement.

The CPO is charged with making sure the LHA follows procurement law.

The Board must vote to approve all contracts and designate who signs it.

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Slide 49: The Procurement Policy

The procurement policy typically covers the following topics:

Invitations to bid

Request for proposals, or RFPs

Bid specifications; and

The role of the Board in issuing, reviewing and approving LHA’s procurement practices.

The Board reviews the Procurement Policy annually to ensure compliance with all state procurement laws and DHCD regulations and policies

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Slide 50: DHCD Involvement in Procurement

DHCD approval is required on all service and construction contracts greater than $50K OR service contracts that are greater than three years.

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Slide 51: Pay Attention to the Governing Law

As you can see, different types of procurements must follow different laws and processes. Next we’ll look at which laws govern which types of procurement.

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Slide 52: Types of Procurement and Applicable Laws

Here’s a look at which laws govern which types of procurement.

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Slide 53: M.G.L. 30B: Procuring Supplies and Services

“Massachusetts General Law Chapter 30B governs procurement for supplies and services- not construction.

When issuing Chapter 30B contracts for under $10,000, LHAs must use “sound business practices.” Sound business practices include:

Soliciting price lists or quotes

Maintaining records

Establishing each vendor is reputable and capable

Affirming supplies or services meet your quality requirements

For goods and services that cost between $10,000 and $50,000, a housing authority must solicit three written quotes for contracts. These quotes should come from no fewer than three persons who customarily provide the supply or service.

For goods or services that cost more than $50,000, an LHA must conduct a public procurement, such as issuing a Request for Proposals, in order to obtain competitive sealed bids or proposals.

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Slide 54: Most Common Mistake: M.G.L. 30B Contracts

A common mistake LHAs make is to keep extending contracts that have expired, without re-procuring. LHA contracts may not exceed three years, including all extensions and renewals, unless a majority vote of the Board authorizes the procurement of a longer term contract in advance.

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Slide 55: Procuring Designers and Contractors for

Construction Projects

Public procurement for Design and Construction contracts are larger and more complicated than for supplies and services. There are different rules depending on project size and scope. Your ED can call your LHA’s Project Manager at DHCD for guidance.

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Slide 56: Most Common Mistake: Construction and Design Projects

A common mistake LHAs make on construction projects is splitting the project into smaller pieces to avoid the applicable procurement law. This is called “bid-splitting” and is not legal.

For example, if an LHA needs all sidewalks paved, they may not break it into several $10,000 projects to avoid advertising.

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Slide 57: Where to Get Procurement Help

Procurement is a very detailed subject. To learn more, the Inspector General (IG) runs regular trainings regarding Chapter 30B and public procurement, and offers manuals regarding Chapter 30B and Designing and Constructing Public Facilities.

The Inspector General (IG) runs regular training's regarding Chapter 30B and public

procurement : www.mass.gov/ig/mcppo/

The Inspector General (IG) also has manuals regarding 30B and Designing and Constructing

Public Facilities: www.mass.gov/ig/publications/manuals/

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Slide 58: Fraud Awareness and Prevention

We’ve talked about the Board’s role in fraud, waste and abuse awareness and prevention in each module. The Office of the Inspector General is charged with preventing and detecting fraud, waste, and abuse in the use of public funds.

Prevention is key, and the IG’s office provides training and technical assistance to public officials such as LHA Board members.

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Slide 59: Common Types of Fraud

The Board should monitor for indicators that could lead to fraud, waste and abuse.

Common types of fraud, waste and abuse include:

Using LHA credit card for personal use

Using LHA equipment for personal use

Taking gifts in exchange for favors, including housing placement or LHA contracts. Violation of the procurement law or collusion with a vendor to steer contracts to a friend or relative is also an abuse.

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Slide 60: Fraud Prevention

Board members have a responsibility to look for indicators that could lead to fraud, waste and abuse. Key indicators include:

Lack of management review

Lack of competent personnel in oversight roles

Lack of independent checks or audits

Lack of employee fraud education. Education could involve code of conduct training or procurement training.

Lack of clear lines of authority; and

Lack of reporting mechanisms.

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Slide 61: Best Practices to Prevent Fraud, Waste and Abuse

Here are some best practices to prevent fraud, waste, and abuse:

Implement an anti-fraud, waste and abuse strategy.

Be aware of red flags

Practice professional skepticism

Review access to systems

Follow the State Conflicts of Interest Law and DHCD Code of Conduct

Allow for segregation of duties to include as many eyes as possible

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Slide 62: Best Practices to Prevent Fraud, Waste and Abuse

LHAs should establish an Internal Control Plan

Document fraud awareness in policies, procedures, and memos

Communicate fraud awareness in meetings and trainings; and

Demonstrate fraud awareness: lead by example

Housing authorities should adhere to policies and procedures; and

Report violations to the Office of the Inspector General

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Slide 63: Fraud, Waste and Abuse Resources

Office of the Inspector General (OIG): www.mass.gov/ig/

Comptroller of the Commonwealth: www.mass.gov

DHCD Hotline: dhcdhotline@massmail.state.ma.us

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Lesson 4 Knowledge Checks (answers are at the end of this document)

13. True or False: The Board must vote to approve all contracts and the

Board must also sign all contracts.

14. True or False: The Board has a responsibility to monitor for indicators

that could lead to fraud.

15. Please check all that apply: The Board’s role in procurement is to:

a. Ensure the LHA complies with all procurement laws and

regulations

b. Serve as the LHA’s Chief Procurement Officer

c. Ensure that the LHA is properly using and accounting for its

funds

16. Check all of the correct answers: Common mistakes in LHA contracting

include:

a. Requiring proof of insurance

b. Extending expired contracts without re-procuring

c. Splitting a project into smaller pieces to avoid procurement

laws

d. Reviewing bid proposals in a Board meeting

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Conclusion

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Slide 71: Congratulations! You have completed Module Four.

Congratulations! You have completed Module Four. Thanks for your

attention and participation. You should now be able to:

Describe the difference between a capital and routine maintenance project.

Identify the sources of funding for capital projects.

Explain the tools of capital planning, including the capital needs assessment, capital improvement planning, and the capital planning system.

Understand bidding and procurement requirements, including the Board’s role in them; and

Monitor for indicators that lead to fraud, waste and abuse in order to stop and prevent those activities.

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Slide 72: Additional Information

Thanks for participating in this training, and for becoming an LHA Board member. For more information, please visit our website www.mass.gov\dhcd.

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Slide 73: End of Module Four.

You have successfully completed Module Four and a record of your completion has been recorded and will be communicated to DHCD. Please note that you must complete all five modules to be in compliance.

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Lesson 1 Knowledge Check Answers:

1. Please check all that apply: Which of the following projects are

capital projects?

Correct Choice

Replacing all the windows in a 20-unit building

Repairing the stove in a resident’s apartment

Removing graffiti from one side of a building and then re-painting

the area

Removing all incandescent common hallway lighting and replacing it

with energy efficient LED lighting.

2. Choose the correct answer. Operating Reserves can be used for:

Correct Choice

Extraordinary maintenance, deferred maintenance and

support of capital projects

Routine, day-to-day maintenance only

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3. True or False: Bond Funds are administered by the local municipality.

Correct Choice

True

False

4. True or False: All LHAs with state-aided public housing receive a share of

the Bond Funds through Formula Funding.

Correct Choice

True

False

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Lesson 2 Knowledge Check Answers:

5. Please choose the best answer: Capital needs assessments are

conducted by:

Correct Choice

The LHA

An independent contractor

A regional capital assistance team (RCAT)

Any of the above

6. Choose the best answer: Capital Improvement Plans (CIPs) are

approved by:

Correct Choice

a. The Staff

b. The Board

c. The Residents

d. DHCD

e. Only b and d

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7. True or False: Projects identified on the CIP are limited by funding

availability.

Correct Choice

True

False

8. True or False: It’s ok for LHAs to submit their capital plan late and not

spend their Formula Funding.

Correct Choice

True

False

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Lesson 3 Knowledge Check Answers:

15. True or False: LHAs can begin a capital project as soon as they have

submitted their CIP to DHCD.

Correct Choice

True

False

16. True or False: LHAs can use their own staff as labor on a capital

project.

Correct Choice

True

False

17. Choose the best answer: Capital projects should be completed…

Correct Choice

In the year planned

Within three years of the year planned

As soon as possible

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18. Choose the best answer: A large capital project:

Correct Choice

a. Has a minimum of $10,000 in construction costs

b. Requires little DHCD oversight in design, bidding and construction

c. both a and b

d. neither a nor b

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Lesson 4 Knowledge Check Answers:

13. True or False: The Board must vote to approve all contracts and the

Board must also sign all contracts.

Correct Choice

True

False

14. True or False: The Board has a responsibility to monitor for indicators

that could lead to fraud.

Correct Choice

True

False

15. Please check all that apply: The Board’s role in procurement is to:

Correct Choice

Ensure the LHA complies with all procurement laws and regulations

Serve as the LHA’s Chief Procurement Officer

Ensure that the LHA is properly using and accounting for its funds

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16. Check all of the correct answers: Common mistakes in LHA contracting

include:

Correct Choice

Requiring proof of insurance

Extending expired contracts without re-procuring

Splitting a project into smaller pieces to avoid procurement laws

Reviewing bid proposals in a Board meeting