Issue Date
March 27, 2000
Audit Case Number
00-AT-202-1005
TO: Ledford L. Austin, Director, Office of Public Housing, 4FPH
FROM: Nancy H. Cooper
District Inspector General for Audit-Southeast/Caribbean, 4AGA
SUBJECT: Benson Housing Authority
Public Housing Programs
Benson, North Carolina
We completed an audit of the Benson Housing Authority, Benson, North Carolina, pertaining to its
public housing programs. This report presents the results of our audit and includes three findings
with recommendations for corrective action.
Within 60 days, please provide us, for each recommendation in this report, a status report on: (1)
the corrective action taken; (2) the proposed corrective action and a planned completion date; or
(3) why action is considered unnecessary. Also, please furnish us copies of any correspondence
or directives issued as a result of the audit. Note that Handbook 2000.06 REV-3 requires
management decisions to be reached on all recommendations within 6 months of report issuance.
It also provides guidance regarding interim actions and the format and content of your reply.
We provided a copy of this report to the auditee.
We appreciate your cooperation during the audit. Should you or your staff have any questions,
please contact me at (404) 331-3369, or Gerald Kirkland, Assistant District Inspector General for
Audit, at (865) 545-4368.
Management Memorandum
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00-AT-202-1005 Page ii
Executive Summary
At your request, we conducted an audit of the Benson Housing Authority’s (Authority) public
housing programs. We audited activities generally for the period October 1, 1997, to October 31,
1999. Our objectives were to determine: (1) whether the Authority had adequate controls to
ensure its assets were properly safeguarded, and (2) whether the Authority complied with
applicable laws, regulations and Department of Housing and Urban Development (HUD)
requirements.
We found the Authority did not manage its programs in accordance with requirements. This
occurred because: (1) it violated conflict of interest requirements; (2) it did not have an adequate
system of internal controls; (3) it did not maintain adequate books and records; and (4) the Board
of Commissioners did not provide adequate oversight. Also, as shown in the findings, the
Executive Director was apparently not sufficiently qualified to manage the Authority. As a result,
the Authority is in substantial default of the Annual Contributions Contract (ACC) and HUD has no
assurance that funds were used effectively to accomplish program objectives.
Specifically, the Authority did not:
• Obtain Board approval to hire relatives of Authority officials;
• Have adequate controls over cash disbursements or cash receipts;
• Properly administer its payroll functions;
• Have adequate books and records to support expenditures; or
• Have adequate Board oversight.
Also, the Authority made improper procurements totaling about $1.6 million. This occurred
because it did not comply with procurement requirements to ensure free and open competition.
Specifically, the Authority did not solicit bids or proposals for repair work or the purchase of two
vehicles. Thus, it did not have proper assurance the procurements were reasonable or the most
advantageous to the Authority. For example, the Authority paid almost $1 million to a company to
perform rehabilitation work. The Authority did not solicit bids for the work and did not have a
written contract with the company. The owner of the company was also the Authority’s
maintenance superintendent responsible for overseeing the rehabilitation work. This violated
conflict of interest requirements.
Further, the Authority did not properly determine tenant rent amounts for any of the seven
households we reviewed. As a result, it was deprived of about $37,000 of rental income. All
seven households included tenants who were either Authority officials or employees, including the
former Board Chairperson. We found the former Chairperson did not report over $73,000 of
household income and the Authority improperly calculated the household’s monthly rent. As a
result, the former Chairperson underpaid rent by more than $20,000. The former Chairperson was
indicted for similar offenses in December 1996 by the Superior Court Division of the State of
North Carolina. We found other cases where the Authority did not include income for employees
when determining their monthly rent.
Page iii 00-AT-202-1005
Executive Summary
Prior to the issuance of this report: (1) the former Chairperson resigned from the Board and
moved out of her unit; (2) the Executive Director resigned; and, (3) the North Carolina State Office
(State Office) suspended the Authority’s Comprehensive Improvement Assistance Program
(CIAP).
In January 1997, the State Office determined the Authority did not have adequate internal controls
and used incorrect employee income when determining rents. The Authority did not take
appropriate corrective action to prevent future occurrences.
Given the historical mismanagement of the Authority, we recommend you declare the Authority in
substantial default of the ACC and require it to deliver possession and control of the projects to
HUD. Our recommendations address other concerns identified in the Findings.
Authority Response to the draft report
We provided the draft audit findings to the current Board Chairperson and Executive Director on
March 2, 2000. The Chairperson provided written comments to the draft findings on March 10,
2000, which are summarized within each finding and included in their entirety as Appendix B. We
also discussed the draft audit findings with the Chairperson and Executive Director at an exit
conference on March 14, 2000. They generally agreed with our draft findings and stated the
Authority has initiated corrective actions to resolve many deficiencies and will implement
additional procedures. We considered the comments in preparing our final report.
00-AT-202-1005 Page iv
Table of Contents
Management Memorandum i
Executive Summary iii
Introduction 1
Findings
1 The Authority Mismanaged its Public Housing Programs 3
2 The Authority Made Improper Procurements Totaling About
$1.6 Million 11
3 The Authority Was Deprived of $37,000 in Rental Income 15
Follow Up On Prior Audits 19
Appendices
A Schedule of Underpaid Rent 21
B Auditee Comments 23
C Distribution 27
Page v 00-AT-202-1005
Table of Contents
Abbreviations
ACC Annual Contributions Contract
CFR Code of Federal Regulations
CIAP Comprehensive Improvement Assistance Program
HUD Department of Housing and Urban Development
OIG Office of Inspector General
VOE Verification of Employment
00-AT-202-1005 Page vi
Introduction
Background
The Authority was established in 1961. It currently administers 5 projects consisting of 173
public housing units under Annual Contributions Contract Number A-4308 .
The Authority is governed by a seven-member Board of Commissioners appointed by the Mayor.
Each member is appointed to a 5-year term. Ms. Maxine Holley served as the Board Chairperson
from October 1997 through September 1999. She previously served as the Chairperson from
October 1993 through September 1994 and was a Board member for about 10 years. She
resigned from the Board in November 1999. Mr. George R. Murphy is the current Chairperson.
The majority of current Board members are newly appointed and were not members during most of
our audit period. Ms. Juanita English served as the Executive Director from December 1992 until
she resigned in January 2000. Mr. William Stewart is the current acting Executive Director.
In fiscal year ended September 30, 1998, the Authority managed operating revenue of about
$388,000. Additionally, from October 1, 1994, through May 31, 1998, the Authority received
about $2.3 million from HUD for CIAP work. Between October 1994 and September 1995, the
Authority also received about $1.2 million from HUD to convert former Section 23 leased units
into public housing units.
The Authority maintains its books and records at its office at 413 Williams Drive, Benson, North
Carolina.
Audit Objective, Scope, and Methodology
Our objectives were to determine: (1) whether the Authority had adequate controls to ensure its
assets were properly safeguarded, and (2) whether the Authority complied with applicable laws,
regulations and HUD requirements. We reviewed activities and management controls regarding
cash receipts and disbursements, procurements, payroll, and tenant certifications.
To meet our objectives, we:
• Interviewed HUD North Carolina State Office and Authority staff.
• Reviewed books and records as considered necessary.
• Reviewed disbursements totaling about $1.9 million to assess eligibility and support. This
included about $1.2 million of CIAP funds, $.6 million of Section 23 funds, and $.1 million
of insurance casualty loss funds.
• Reviewed procurement files to assess procurement procedures.
Page 1 00-AT-202-1005
Introduction
• Performed a cash count and evaluated a sample of bank deposits to determine whether
funds were deposited timely.
• Reviewed the Authority’s tenant certifications and rent calculations for seven households
that included tenants who were Authority employees or officials.
• Reviewed the minutes from Board meetings from January 1, 1995, through October 31,
1999, to determine whether the Board provided adequate oversight.
• Inspected a judgmental sample of 17 units to determine whether renovation work appeared
adequate.
The audit covered Authority activities from October 1, 1997, through October 31, 1999, but was
expanded into prior and subsequent periods as deemed appropriate. Field work was performed
from May through November 1999. We conducted our audit in accordance with generally
accepted government auditing standards.
00-AT-202-1005 Page 2
Finding 1
The Authority Mismanaged its Public Housing
Programs
The Authority mismanaged its public housing programs. This occurred because it did not: (1)
comply with conflict of interest requirements: (2) have an adequate system of internal controls; (3)
maintain adequate books and records; or, (4) have adequate Board oversight. As a result, the
Authority is in substantial default of the ACC and HUD has no assurance that funds were used
effectively to accomplish program objectives.
The Authority was required to operate its projects in
Criteria compliance with the ACC and all applicable statutes,
executive orders, and regulations. Section 19 of the ACC
provides conflict of interest requirements. It states the
Authority may not hire an employee in connection with a
project under the ACC if the prospective employee is an
immediate family member of any employee of the Authority
who formulates policy or influences decisions with respect
to the projects or any present or former member or officer of
the governing body of the Authority. The Authority’s
personnel policy provides that the Authority will not employ
any spouse or immediate relative of its staff who resides in
the same household on a permanent basis without Board
approval.
Title 24 of the Code of Federal Regulations (CFR), Part 85,
requires the Authority to maintain effective control and
accountability for all cash, property and other assets. The
Authority’s internal control policy requires the Executive
Director to review and inspect each invoice prior to
payment and deposit cash receipts as frequently as possible.
The ACC requires the Authority to maintain complete and
accurate books of account that permit timely and effective
audit.
The Authority’s Bylaws require the Board to hold monthly
meetings. The Secretary of the Board, the Executive
Director, is to provide an accounting of transactions and
financial conditions at each monthly meeting.
Page 3 00-AT-202-1005
Finding 1
We found the Authority did not: (1) comply with conflict of
interest requirements; (2) have an adequate system of
internal controls; (3) maintain adequate books and records;
or, (4) have adequate Board oversight. Specifically, the
Authority did not:
• Obtain Board approval to hire relatives of Authority
officials;
• Have adequate controls over cash disbursements or
cash receipts;
• Properly administer its payroll functions;
• Have adequate books and records to support
expenditures; or
• Have adequate Board oversight.
The Executive Director violated the ACC and Authority
The Authority did not conflict of interest policies by hiring her spouse and a Board
comply with conflict member’s son as Authority employees. The Executive
of interest Director also hired the Authority’s CIAP general contractor
requirements as the maintenance superintendent. She hired them without
Board approval.
The Executive Director’s spouse worked periodically as an
Authority employee and as a contractor from October 1994
through September 1997. The Authority paid him about
$30,200 during this period. The Executive Director
prepared her spouse’s time records, invoices, and pay
checks. She also endorsed and cashed some of her spouse’s
pay checks.
The Board Chairperson’s son was employed as a Drug
Elimination Grant Coordinator from May 13, 1998, through
December 17, 1998. The Authority initially advertised the
position and hired someone at an hourly rate of $8. The
employee left after a brief time. The Authority did not
advertise the position again prior to hiring the Board
Chairperson’s son. The Authority paid him $15 per hour.
Again, there was no evidence the Board approved the hiring
of this family member.
00-AT-202-1005 Page 4
Finding 1
The Authority hired Turnage Construction Company to
perform construction work under the CIAP program. The
Authority paid the company almost $1 million from October
1994 to August 1997. Also, the Authority hired the owner of
Turnage as its maintenance superintendent. The Authority
paid him over $79,000 in salary as the maintenance
superintendent during this period. Further, the contractor
hired the Executive Director’s spouse as a subcontractor.
The contractor paid the spouse about $37,600 for his
subcontract work.
One of the maintenance superintendent’s duties was to
oversee the CIAP rehabilitation. He was also in a position
to influence decisions concerning the amount and types of
repairs to be made. As the contractor, he submitted invoices
for payment which were reviewed and paid by the Executive
Director.
The CIAP rehabilitation work received minimal review by
HUD staff and a consultant hired by the Authority.
However, in August 1997 the State Office informed the
Authority the maintenance superintendent could not also be a
contractor. He subsequently resigned as maintenance
superintendent.
The Executive Director stated that she was not aware of the
conflict of interest requirements in the ACC when she hired
her spouse and the Board Chairperson’s son. She also
stated that she hired her spouse because he would work at
night and on weekends when others would not.
The Authority did not have adequate controls over cash
Inadequate controls disbursements. Specifically, the Executive Director did not
over cash adequately review invoices prior to payment and in some
disbursements instances she prepared invoices for contractors. As a result,
some payments were not supported and contractors were
paid for duplicate invoices.
For example, a contractor submitted two invoices dated
January 6, 1997, for reimbursement of materials; one for
$5,715 and one for $5,576, a total of $11,291. The
Authority paid the invoices on February 7, 1997. The
contractor submitted the same packing slip as support for
both charges. The packing slip did not include any cost
Page 5 00-AT-202-1005
Finding 1
amounts. The supplier verified the correct amount of
materials purchased was $5,442. The Authority paid the
contractor the full $11,291. Thus, it overpaid the contractor
$5,849.
On another occasion, the same contractor submitted a receipt
from a building materials supplier for $7,461. The receipt
was for payment on the contractor’s account and did not
document what materials were purchased or where they
were to be used. Thus, we cannot be assured the materials
were purchased for the Authority.
We also found the Authority paid contractors three times in 4
months to paint the same unit located at 400 Hall Street. The
contractors, including the Executive Director’s spouse, were
paid a total of $5,203. The Authority could not justify the
reasons for painting the unit three times in 4 months.
The Executive Director also prepared invoices for a drywall
contractor. The Executive Director maintained a file which
contained blank invoices for the drywall contractor. The
Executive Director prepared the invoices and made the
payments to the contractor. She also prepared invoices for
payment to her spouse, her cousin, and two Authority
employees for painting units.
The Authority did not have adequate segregation of duties
Inadequate controls over the receipt and deposit of cash. The Occupancy Clerk
over cash receipts collected cash receipts, posted receipts to tenants’ account
receivable records, prepared and made bank deposits, and
reconciled bank statements.
Also, the Authority did not deposit funds timely. On three
occasions between March 1, 1999, and June 21, 1999, it
maintained over $10,000 cash at the Authority. At one point,
it had over $16,000 cash on hand. Each day, the Authority
placed the funds in a night depository at a bank. However,
rather than depositing the funds into its account, an Authority
employee picked up the funds the next business day and
returned them to the Authority. It did not deposit the funds
until the Occupancy Clerk posted the receipts to the tenant
accounts.
00-AT-202-1005 Page 6
Finding 1
Following a January 1997 review, the State Office notified
the Authority that its internal controls were not adequate.
The State Office recommended the Executive Director verify
the accuracy of receipts and deposit funds timely. The State
Office cleared the finding based on the Authority’s response
that the Executive Director would balance receipts and make
the deposits. However, we found the Authority did not
implement the procedures.
The Executive Director was responsible for maintaining
Inadequate payroll employee time and attendance records, preparing payroll,
procedures and signing payroll checks. She also maintained her own
time and attendance records. We found the Executive
Director did not adequately account for her accrued and
used leave. For example, a 1995 memo in the file indicated
she had a balance of 380 days of sick leave. According to
the Authority’s personnel policy, she could have only earned
246 days. Also, a Leave Record Form indicated that she
used 88 hours of leave during the period October 21, 1997,
through October 31, 1997. This period included weekend
days for which leave was not required.
The Authority also failed to accrue funds to pay employees
for unused leave upon their termination. The personnel
policy provides that employees would be paid for
accumulated vacation leave upon submission of a signed and
dated resignation. However, the Authority has not accrued
funds to pay for the leave. Thus, the Authority may not be
able to pay employees upon resignation.
The Authority did not maintain books and records that
Inadequate books and permitted timely or effective audit. For example, we found
records it did not have auditable time and attendance records to
support payroll disbursements. The Executive Director said
she keeps up with employee time by watching when their
cars arrive and when they leave. She wrote down the
number of hours either on a Daily Attendance Record, her
desk calendar, or on Post-It notes. After payroll checks
were distributed, she threw away the Post-It notes.
We also attempted to ensure CIAP funds were spent only for
eligible activities. However, the Authority did not keep
adequate records to readily identify and account for the
funds. Rather, it commingled the CIAP funds with the
operating funds, which prevented timely and effective audit.
Page 7 00-AT-202-1005
Finding 1
The Authority’s Board did not provide adequate oversight of
Inadequate Board the Authority’s activities or safeguard Authority assets.
oversight
The Board is responsible for overseeing Authority activities
and for establishing policies and procedures that govern the
Authority. In addition, the Board should ensure the
Executive Director follows established policies and
procedures.
The Board did not conduct monthly meetings as required by
Authority Bylaws. From October 1997 to August 1999, the
Board only held 12 of 26 required meetings. The other
meetings were either canceled or postponed, generally
because there was no business to discuss or because there
was not a quorum present to vote on issues. However,
during the period October 1994 through August 1998, Board
members did meet with Authority employees, contractors,
subcontractors, or the Town inspector for meals on 20
occasions. The Authority paid about $4,000 for these meals.
Also, as Secretary of the Board, the Executive Director was
to provide an account of the Secretary’s financial
transactions and the Authority’s financial condition at each
regular meeting. The minutes from the Board meetings did
not show this was done. Thus, the Board was not aware of
events occurring at the Authority and could not properly
oversee Authority operations.
The current Board Chairperson agreed with our assessment
Authority that the Authority was mismanaged. He advised that the
comments majority of the current Board Commissioners were not
present or serving on the Board during most of the audit
period. He stated the current Board is aware of conflict of
interest requirements, will ensure that no future conflict of
interest will occur, and will exercise adequate oversight of
all Authority operations. The Authority began depositing
cash receipts on a daily basis and improved time and
attendance procedures. Also, the Board will hold monthly
meetings and will require the Executive Director to advise
the Board of the Authority’s financial condition and present
all bills and checks to the Board for review.
00-AT-202-1005 Page 8
Finding 1
We commend the efforts to improve Authority management.
OIG response to However, we remain concerned that current Authority
comments management may not be able to timely resolve the
deficiencies cited in the finding. Our concerns are based on
the historical mismanagement of the Authority and the
relative inexperience in public housing programs by the
current Board members. Also, the current Executive
Director has not worked in public housing programs in
several years, during which time public housing rules have
changed significantly. The Executive Director may not
currently have sufficient expertise and is only serving
temporarily pending the hiring of a permanent Executive
Director.
Recommendations We recommend you:
1A. Declare the Authority in substantial default of the
ACC;
1B. Require the Authority to deliver possession and
control of the projects to HUD;
1C. Take appropriate administrative actions against the
former Board Chairperson; and,
1D. Take appropriate administrative actions against the
former Executive Director.
Page 9 00-AT-202-1005
Finding 1
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00-AT-202-1005 Page 10
Finding 2
The Authority Made Improper Procurements
Totaling About $1.6 Million
The Authority made improper procurements totaling about $1.6 million. This occurred because it
did not comply with procurement requirements to ensure free and open competition. Specifically,
the Authority did not solicit bids or proposals for repair work or the purchase of two vehicles.
Thus, it did not have proper assurance the procurements were reasonable or the most advantageous
to the Authority.
Title 24 CFR, Part 85.36, provides procurement
Criteria requirements for public housing authorities. It requires that
all procurement transactions be conducted in a manner that
provides full and open competition. The Authority’s
procurement policy, dated August 7, 1995, provides
requirements for soliciting and documenting bids and quotes.
It requires the Authority to seek full and open competition in
all procurement transactions.
HUD Handbook 7460.8 REV-1, Procurement Handbook for
Public Housing Agencies and Indian Housing Authorities,
Chapter 2, provides that housing authorities should attempt
to obtain full and open competition to ensure that goods and
services are obtained at a reasonable price.
We found the Authority did not properly procure repair
Authority used services and materials for rehabilitation work. We
improper procurement reviewed payments the Authority made between October
procedures 1994 and May 1998 for rehabilitation work. The Authority
obtained quotes for the installation of vinyl siding and the
exterior renovation of one building. However, it paid about
$1.6 million for rehabilitation work under the CIAP and
Section 23 conversion programs that it procured without
bids or quotes. This included payments for general
construction work, painting, electrical work, heating and air
conditioning installation, cabinets, and other items. Contrary
to the Authority’s procurement procedures, the Executive
Director personally selected all of the contractors and failed
to execute contracts for the services provided. As such, the
Authority was unable to properly monitor the progress of
work performed or ensure funds were properly expended.
Page 11 00-AT-202-1005
Finding 2
Of the $1.6 million, the Authority paid Turnage Construction
Company almost $1 million to perform general construction
work. The Authority did not solicit bids for the work and
did not have a written contract with the company. The
owner of the company was also the Authority’s maintenance
superintendent during this same period. This situation
presented a conflict of interest which was discussed further
in Finding 1.
We requested documentation from the company to support
payments from the Authority. However, while the company
paid the owner’s wife $20,000 over a 2-year period for
bookkeeping services, it did not maintain business
accounting records that identified receipts. In fact, the same
bank accounts were used for company and personal
purposes. Although we issued a subpoena, the owner did
not provide complete records. For example, pages of some
bank statements and checks were not provided. Thus, we
could not conclude as to whether all payments were proper.
The Authority also did not request bids for other work
totaling $600,634. Of this amount, the Authority paid
$55,996 for painting services, including $24,077 paid to
Authority employees. These payments were in addition to
the employees’ salaries. It also paid $29,856 to relatives of
the Executive Director for painting services.
The Executive Director said she had a hard time getting
contractors to bid on CIAP work because the Authority only
repaired one or two units at a time. Generally contractors
were not interested in small jobs. The Authority did not
have any documentation to support that it contacted any other
contractors regarding the rehabilitation work.
The State Office notified the Authority on July 27, 1999, that
all on-going work related to the CIAP program was to stop
and that all expenditures would be suspended effective July
29, 1999. The suspension was attributed to our ongoing
audit.
00-AT-202-1005 Page 12
Finding 2
The Authority purchased two vehicles in February 1997 at a
Bids not obtained for total cost of $39,875. It purchased a 1997 truck for $19,300
vehicle purchases and a 1997 car for $20,575. The Authority did not obtain
bids or have an invoice to support the truck purchase. It did
obtain a written quote of $20,575 for the car. There was
also a note in the file indicating it obtained a quote for
$20,115 from another dealer; however, there was no other
support for the quote. The Authority did not accept the
lower quote because the vehicle could not be delivered for
about 4 to 6 weeks.
The Authority generally agreed with the deficiencies cited in
Authority the finding. It also was unable to find documentation to
comments support that bids were properly solicited. The Board
Chairperson stated the Authority will follow its written
procurement policy and will seek full and open competition
in all procurement transactions.
We agree the Authority must follow its procurement policy.
OIG response to However, it must also ensure the policy is in accordance
comments with HUD requirements and ensure that proper contracts are
executed. Further, it must ensure that proper contractor
oversight is provided and that payments are made only for
properly supported costs.
Recommendations We recommend you:
2A. Require the Authority to implement procurement
procedures that comply with regulations;
2B. Require the Authority to provide proper contractor
oversight;
2C. Require the Authority to implement procedures to
ensure payments are made only for properly
supported contractor costs; and,
2D. Do not release any grant funds to the Authority until
you ascertain it has implemented proper
procurement procedures.
Page 13 00-AT-202-1005
Finding 2
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00-AT-202-1005 Page 14
Finding 3
The Authority was Deprived of $37,000 in
Rental Income
The Authority did not properly determine tenant rent amounts. As a result, it was deprived of
about $37,000 of rental income. Specifically, the Authority did not include appropriate household
income when determining rent. This occurred because the Authority did not have adequate
controls to verify tenant information and did not determine rent based on income and household
information it had available.
United States Code Title 42, Section 1437a, Rental
Criteria Payments, provides procedures for determining tenants’
monthly rent. All family members living in a unit must be
included on the lease. Generally, rent is the higher of 30
percent of total family monthly adjusted income or 10
percent of unadjusted monthly income.
According to 24 CFR, Part 960, the Authority must have
adequate procedures to obtain and verify tenant information.
Also, the head of the household must certify that the
information given to the Authority concerning household
composition, income, net family assets, and allowances and
deductions are accurate and complete to the best of their
knowledge.
We reviewed the Authority’s tenant certifications and rent
Rents improperly calculations for seven households during periods between
computed August 1996 and August 1999. The seven households
included tenants who were either Authority officials or
employees. In fact, one of the tenants was a former Board
Chairperson. We found the Authority did not properly
determine the rent in any of the seven cases.
For two of the seven cases, employees lived in units but
were not included on the leases. Thus, their incomes were
not used in determining unit rents. The Authority’s
personnel and payroll records showed the employees lived
in the units. Therefore, the Authority knew they were not
included on the leases and knew their incomes were not used
in determining the unit rents.
Page 15 00-AT-202-1005
Finding 3
One of these cases involved the former Chairperson. Her
son, an Authority employee, lived in her unit during the
period April 1997 through August 1999 but was not included
on the lease. Thus, his income of $46,357 was not included
in the rent calculation. Also, the former Chairperson did not
report $23,346 of her income nor did she report $3,776 in
income from her daughter who also lived in the unit.
Further, the Authority improperly calculated the former
Chairperson’s rent. The Authority calculated the rent based
on net income of $874 from a questionable Verification of
Employment (VOE) rather than gross income of $1,617 from
a certified VOE. As a result of these actions, the Authority
was deprived of over $20,000 of unpaid rent by the former
Chairperson and her family members.
In four of the seven cases, the Authority either did not
include the employees’ income or did not include a portion
of the income when determining rent. This occurred even
though the employees were reported on the leases. In one of
these cases, the Authority excluded the entire income of
$13,368 for one tenant and did not include $4,725 of an
Authority employee’s income for the period August 1996
through March 1997. It calculated the rent based on $10,000
income even though it knew the employee’s income from the
Authority was $14,725. Once again, this employee was the
former Chairperson’s son. As a result of this case, the
Authority was deprived of $3,263 of rent income.
We found other examples of questionable activities
regarding employee rent calculations. Appendix A of this
report is a schedule of problems found with the seven cases.
The Executive Director hired Authority employees,
maintained personnel records, and prepared payroll. The
records showed the employees lived in Authority units.
Thus, she knew the employees lived in the units. Further, the
Executive Director was responsible for ensuring that tenants
properly certified their income and family composition and
that rents were properly determined and paid.
00-AT-202-1005 Page 16
Finding 3
The State Office identified similar problems during a
North Carolina State January 1997 management review. In February 1997, the
Office previously State Office reported the Authority used the incorrect
reported rent employee income when determining their rents. The
discrepancies Authority determined the rents based on $10,000 income for
all employees regardless of their actual income. The report
also stated the Authority improperly used net income rather
than gross income when determining the former Board
Chairperson’s rent.
The State Office required the Authority to obtain certified
income verifications for all tenants and recalculate the rents
in accordance with 24 CFR, Part 913. The Authority was to
provide tenants with a 30-day notice of any changes to their
rent. The report also recommended the Authority recompute
the rents of the Board Chairperson and another tenant based
on their gross incomes.
In its March 24, 1997, response, the Authority stated it
corrected the deficiencies for the cases identified by the
State Office. However, the response did not indicate the
Authority took actions to prevent future occurrences.
In summary, the Authority did not properly calculate tenant
rents even though it had the necessary income and residency
data available. As a result, the Authority was deprived of
about $37,600 in rental income.
The Board Chairperson stated the Authority is committed to
Authority proper determination and collection of tenant rents. He
comments stated that all tenant rents will be re-computed and verified
on the anniversary date of the tenants’ lease. The Authority
requested that OIG pursue any and all actions against
persons who violated HUD regulations. If OIG does not
take action, the Board intends to provide a copy of the audit
report to the local District Attorney for review.
Page 17 00-AT-202-1005
Finding 3
We recognize the Board’s positive actions to re-compute
OIG response to tenant rents and verify information. The Authority must also
comments implement and enforce procedures to reasonably prevent
future occurrences. This includes taking swift and forceful
actions against persons who knowingly fail to report all
required information to the Authority regarding household
income and composition.
Recommendations We recommend that you require the Authority to:
3A. Implement adequate procedures to ensure tenant
information is complete, accurate, and timely
reported to the Authority;
3B. Implement and enforce procedures to ensure swift
and forceful actions are taken against persons who
knowingly fail to report all required information to
the Authority; and,
3C. Collect underpaid rent amounts shown in Appendix
A.
00-AT-202-1005 Page 18
Follow Up On Prior Audits
This is the first OIG audit of the Benson Housing Authority. The Authority’s last independent audit
report covered the period ended September 30, 1997. The report did not contain any findings.
HUD’s North Carolina State Office, Public Housing Division, conducted a review of Authority
operations in January 1997. The report dated February 13, 1997, contained nine findings. Three
of the findings related to internal controls and tenant issues. The other six findings did not impact
our audit objectives. The State Office closed all the findings based on information submitted by
the Authority. Our report shows the Authority did not take adequate actions to resolve internal
controls or tenant issues.
Page 19 00-AT-202-1005
Follow Up On Prior Audits
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00-AT-202-1005 Page 20
Appendix A
Schedule Of Underpaid Rent
Underpaid
Household Deficiencies Identified Rent
A An Authority employee lived in the unit, but was not reported on
the lease. Thus, the Authority did not use income of $46,357 to
compute the rent. Another tenant in the household did not report
$27,122 of income. Also, the Authority incorrectly used a tenant’s
monthly net income of $874 instead of gross income of $1,617 to
compute the rent. $20,152
B An Authority employee lived in the unit but was not on the lease.
Thus, the Authority did not use income of $28,380 to compute the
rent. 5,658
C An Authority employee’s income of $15,372 was not used to
compute rent. The tenant also did not report $2,545 of other
income to the Authority. 4,177
D The Authority did not include $4,725 of an employee’s income
when it calculated the rent. Also, Authority income of $6,531
reported on Internal Revenue Service Form-1099 was not used.
Further, the Authority did not use reported income of $13,368 for
another household member. 3,263
E The Authority did not include $6,684 of an employee’s income
when it calculated the rent. 1,992
F The Authority did not use reported tenant income of $3,689 when it
calculated the rent. 1,195
G The Authority did not include $5,424 of an employee’s income
when it calculated the rent. 597
Total Underpaid Rent $37,034
Page 21 00-AT-202-1005
Schedule Of Underpaid Rent
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00-AT-202-1005 Page 22
Appendix B
Auditee Comments
Page 23 00-AT-202-1005
Auditee Comments
00-AT-202-1005 Page 24
Auditee Comments
Page 25 00-AT-202-1005
Auditee Comments
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00-AT-202-1005 Page 26
Appendix C
Distribution
Executive Director, Benson Housing Authority, Benson, North Carolina
Chairman, Board of Commissioners, Benson Housing Authority, Benson, North Carolina
Deputy Secretary, SD (Room 10100)
Chief of Staff, S (Room 10000)
Special Assistant to the Deputy Secretary for Project Management, SD (Room 10100)
Acting Assistant Secretary for Administration, S (Room 10110)
Assistant Secretary for Congressional and Intergovernmental Relations, J (Room 10120)
Senior Advisor to the Secretary, Office of Public Affairs, S, (Room 10132)
Deputy Assistant Secretary of Administrative Services/Director of Executive Secretariat, AX
(Room 10139)
Director of Scheduling and Advance, AL (Room 10158)
Counselor to the Secretary, S (Room 10234)
Deputy Chief of Staff, S (Room 10226)
Deputy Chief of Staff for Operations, S (Room 10226)
Deputy Chief of Staff for Programs and Policy, S (Room 10226)
Director, Office of Special Actions, AK (Room 10226)
Deputy Assistant Secretary for Public Affairs, W (Room 10222)
Special Assistant for Inter-Faith Community Outreach, S (Room 10222)
Executive Officer for Administrative Operations and Management, S (Room 10220)
Senior Advisor to the Secretary for Pine Ridge Project, W, (Room 10216)
General Counsel, C (Room 10214)
Director, Office of Federal Housing Enterprise Oversight, O (9th Floor Mailroom)
Assistant Secretary for Housing/Federal Housing Commissioner, H (Room 9100)
Office of Policy Development and Research, R (Room 8100)
Inspector General, G (Room 8256)
Assistant Secretary for Community Planning and Development, D (Room 7100)
Assistant Deputy Secretary for Field Policy and Management, SDF (Room 7108)
Government National Mortgage Association, T (Room 6100)
Assistant Secretary for Fair Housing and Equal Opportunity, E (Room 5100)
Chief Procurement Officer, N (Room 5184)
Assistant Secretary for Public and Indian Housing, P (Room 4100)
Chief Information Officer, Q (Room 3152)
Director, Office of Departmental Equal Employment Opportunity, U (Room 5128)
Director, Office of Departmental Operations and Coordination, I (Room 2124)
Chief Financial Officer, F (Room 2202)
Director, HUD Enforcement Center, V, 451 Portals Bldg, Suite 200, Washington, DC 20140
Director, Real Estate Assessment Center, X, 1280 Maryland Avenue, SW, Suite 800
Director, Office of Multifamily Assistance Restructuring, Y, 4000 Portals Building
Deputy Chief Financial Officer for Finance, FF (Room 2202) (2)
Director, Office of Budget, FO (Room 3270)
Page 27 00-AT-202-1005
Distribution
State Coordinator, North Carolina State Office, 4FS
Director , Office of Public Housing, 4FPH
Secretary's Representative, 4AS
Audit Liaison Officer, 3AFI
Audit Liaison Officer, Office of Public and Indian Housing, PF (Room P8202)
Departmental Audit Liaison Officer, FM (Room 2206)
Acquisitions Librarian, Library, AS (Room 8141)
Counsel to the IG, GC (Room 8260)
HUD OIG Webmanager-Electronic Format Via Notes Mail (Cliff Jones@hud.gov)
Public Affairs Officer, G (Room 8256)
Director, Housing and Community Development Issue Area, U.S. GAO, 441 G Street N.W.,
Room 2474, Washington DC 20548 ATTN: Judy England-Joseph
The Honorable Fred Thompson, Chairman, Committee on Governmental Affairs,
United States Senate, Washington DC 20510-6250
The Honorable Joseph Lieberman, Ranking Member, Committee on Governmental Affairs,
United States Senate, Washington DC 20510-6250
The Honorable Dan Burton, Chairman, Committee on Government Reform,
United States House of Representatives, Washington DC 20515-6143
The Honorable Henry A. Waxman, Ranking Member, Committee on Government Reform,
United States House of Representatives, Washington, DC 20515-4305
Ms. Cindy Fogleman, Subcommittee on Oversight and Investigations, Room 212,
O'Neil House Office Building, Washington, DC 20515-6143
Steve Redburn, Chief, Housing Branch, Office of Management and Budget, 725 17th Street, NW,
Room 9226, New Executive Office Bldg., Washington, DC 20503
Sharon Pinkerton, Deputy Staff Director, Counsel, Subcommittee on Criminal Justice, Drug
Policy and Human Resources, B373 Rayburn House Office Bldg., Washington, DC 20515
00-AT-202-1005 Page 28
Benson Housing Authority, Public Housing Programs, Benson, NC
Published by the Department of Housing and Urban Development, Office of Inspector General on 2000-03-27.
Below is a raw (and likely hideous) rendition of the original report. (PDF)