AUDIT REPORT
CHELSEA HOUSING AUTHORITY
CHELSEA, MASSACHUSETTS
2002-BO-1005
SEPTEMBER 30, 2002
OFFICE OF AUDIT, NEW ENGLAND
BOSTON, MASSACHUSETTS
Issue Date
September 30, 2002
Audit Case Number
2002-BO-1005
TO: Donna J. Ayala, Director, Office of Public Housing, 1APH
FROM: Barry L. Savill, Regional Inspector General, Office of Audit, 1AGA
SUBJECT: Chelsea Housing Authority
Chelsea, Massachusetts
We performed an audit of the Chelsea Housing Authority (CHA). Our audit objectives were to
determine whether the CHA was administering its public housing and Section 8 programs in an
efficient, effective and economical manner, and whether the CHA was complying with the terms
and conditions of its Annual Contributions Contract (ACC), applicable laws, HUD regulations and
other applicable directives.
The report contains three findings:
1. Ineffective Management of Section 8 Vouchers.
2. Refrigerator Policy Leads to Families being Overcharged.
3. Inadequate Accounting for Capital Fund Transactions.
For each recommendation in this report, please give us a status report within 60 days (as required
by HUD Handbook 2000.06 REV-2) on: (1) the corrective action taken; (2) the proposed corrective
action and the date to be completed; or (3) why action is considered unnecessary. Additional status
reports are required 90 days and 120 days after report issuance for any recommendation without a
management decision. Also, please furnish us copies of any correspondence or directives issued
because of the audit.
Should you or your staff have any questions, please contact us at (617) 994-8380.
Management Memorandum
(THIS PAGE LEFT BLANK INTENTIONALLY)
2002-BO-1005 Page ii
Executive Summary
We performed an audit of the Chelsea Housing Authority’s operations. Our audit objectives were
to determine whether the Chelsea Housing Authority (CHA) was administering its housing
programs in an efficient, effective and economical manner, and whether the CHA was complying
with the terms and conditions of its Annual Contributions Contract (ACC), applicable laws, HUD
regulations and other applicable directives.
We determined that the CHA needs to:
Audit Results
Ø Effectively manage its Section 8 vouchers,
Ø Grant tenants in Federal family projects an allowance for
maintenance and replacement of a refrigerator when
CHA does not provide one,
Ø Reconcile its Capital Fund Program (CFP) account.
The CHA did not effectively manage its Section 8 Voucher
Program in accordance with Federal guidelines. The CHA
did not follow the requirements of a Federal District Court
ruling by obtaining permission from initial PHAs located
within Massachusetts before absorbing Section 8 Vouchers.
Also, CHA did not notify out-of-state PHAs, as required by
HUD, that Section 8 Vouchers they had issued had been
absorbed by the CHA. As a result, for the vouchers it
absorbed, the CHA received two payments for each family
receiving the subsidy—one from the initial PHA that issued
the voucher, and another from HUD.
The CHA improperly transferred the ownership of
refrigerators to tenants of its Federally owned family projects
through a resolution by the Board of Commissioners in
January 1994. In this transfer of ownership, the CHA did
not: (1) request HUD approval, (2) provide the tenants an
allowance to cover the additional costs of owning and
maintaining the refrigerators, or (3) revise the tenant leases
removing the responsibility for the refrigerators from the
CHA. As a result, the CHA owes its tenants as much as
$107,000 as an allowance for maintaining and replacing the
refrigerators.
Page iii 2002-BO-1005
Executive Summary
The CHA was unable to provide supporting documentation
for their receipts and disbursements for capital expenditures
for fiscal year 2000. During 2000, the CHA requisitioned
$406,206 and disbursed $459,707 under the CFP.
Additionally, the CHA did not requisition all funds from
HUD for their CFP; instead, the CHA borrowed funds from
other programs to fund the CFP. As of June 30, 2001, the
CFP Program owed $606,896 to other programs and, as a
result, the CHA cannot assure that disbursements under CFP
are accurate, timely or valid.
We have provided specific recommendations to assist the
Recommendations CHA in correcting the reported deficiencies. The CHA
needs to:
Ø Properly record and reconcile Section 8 payments
and balances each month.
Ø Provide an accounting to HUD identifying all
overpayments resulting from absorbed and
terminated vouchers and return overpayments to
initial PHAs.
Ø Determine an appropriate monthly allowance to
cover the costs incurred by current tenants for
refrigerator repair and replacement and submit the
allowance and supporting documentation to HUD for
approval.
Ø Reimburse current and former tenants the allowance
amount for the period of their tenancy.
Ø Revise tenant leases to show that the CHA is not
providing refrigerators.
Ø Reconcile the FY 2000 CFP account and requisition
CFP funds from HUD for appropriate administrative
and management improvement costs.
Ø Eliminate the accounts payable from the CFP fund to
the Revolving Fund.
The findings were discussed with the CHA’s officials during
the course of the audit. We held an exit conference on July
24, 2002. On August 8, 2002, we provided the CHA a copy
2002-BO-1005 Page iv
Executive Summary
of the draft report for comment. We received the CHA’s
response on September 11, 2002, and included pertinent
comments from the response in the Findings section of the
report. The CHA’s full response is included as Appendix C.
Page v 2002 –BO-1005
Executive Summary
2002-BO-1005 Page vi
Table of Contents
Management Memorandum i
Executive Summary iii
Introduction 1
Findings
1. Ineffective Management of Section 8 Vouchers 3
2. Refrigerator Policy Leads to Families being
Overcharged 9
3. Inadequate Accounting for Capital Fund Transactions 13
Management Controls 17
Appendices
A Schedule of Questioned Costs 19
B Portability Accounts Receivable as of August 17, 2001 21
C Auditee Comments 23
D Distribution 27
Page vii 2002-BO-1005
Table of Contents
Abbreviations
ACC Annual Contributions Contract
CFP Capital Fund Program
CFR Code of Federal Regulations
CHA Chelsea Housing Authority
FY Fiscal Year
HA Housing Authority
HAP Housing Assistance Payment
HQS Housing Quality Standards
HUD Department of Housing and Urban Development
OMB Office of Management and Budget
PHA Public Housing Authority
PHDEP Public Housing Drug Elimination Program
2002-BO-1005 Page viii
Introduction
A five-member Board of Commissioners, chaired by Richard Repici, governs the Chelsea Housing
Authority (CHA). The Executive Director, Michael E. McLaughlin, is responsible for the
administration of daily operations. The CHA office is located at 54 Locke Street in Chelsea,
Massachusetts. The CHA administers 351 units of Federal Low Income Public Housing, 345
vouchers under the Section 8 Housing Choice Program, as well as 560 State Low Income Family
and Elderly units and 145 vouchers under the Massachusetts Rental Voucher Program.
The purpose of our audit was to determine whether the
Audit Objectives CHA is:
Ø Managing its Federal housing programs in an
efficient, effective, and economical manner.
Ø Complying with the terms and conditions of its
Annual Contributions Contract, applicable laws,
HUD Regulations, and other applicable directives.
To accomplish the audit objectives, we:
Audit Scope and
Methodology Ø Reviewed Federal requirements including the Code
of Federal Regulations, HUD Handbooks, Public and
Indian Housing Notices, Office of Management and
Budget Circulars, CHA Policies and Procedures and
applicable Massachusetts General Laws and Federal
Laws related to public housing.
Ø Reviewed Independent Public Accountant’s reports,
HUD’s Section 8 Management Reviews, HUD’s
Public Housing Drug Elimination Program (PHDEP)
Reviews, HUD’s Occupancy Audit, minutes of the
CHA Board of Commissioners meetings, Inspection
Reports and Reports of the U.S. Corps of Engineers
to obtain information relating to CHA operations.
Ø Reviewed tenant files to verify that tenants: qualified
as a family; were within income limits; and were re-
certified annually.
Ø Interviewed Massachusetts Office of Public Housing
personnel, CHA personnel and its Fee Accountant to
obtain procedures for accounting, administration,
procurement, maintenance, occupancy, cash
disbursements and fixed assets related to their Low
Page 1 2002-BO-1005
Introduction
Income Housing, Section 8, PHDEP and Capital
Fund Programs.
Ø Examined CHA’s procurement procedures and
supporting documentation.
We used non-representational samples rather than statistical
samples for the testing, as this methodology was more
appropriate for the areas reviewed. The audit was conducted
between March and November 2001, and covered the period
from January 1, 1999 to August 31, 2001. When
appropriate, the audit was extended to include other periods.
Our audit was conducted in accordance with generally
accepted government auditing standards.
2002-BO-1005 Page 2
Finding 1
Ineffective Management of Section 8 Vouchers
The CHA did not effectively manage the Section 8 Vouchers initially issued by other PHAs. For
the Vouchers initially issued by other PHAs within Massachusetts, the CHA did not follow HUD
guidance that portability procedures did not apply to tenants moving among municipalities within
Massachusetts. For Vouchers initially issued by out-of-state PHAs, the CHA did not notify these
PHAs, as required by Federal regulation, and inform them that these Vouchers had been
absorbed. As a result, the CHA received two payments for each family receiving the subsidy -
one from the initial PHA that issued the voucher, and another from HUD.
Each applicant for assistance under the Section 8 Housing
Section 8 Voucher Choice Voucher Program must meet the definition of a
Program family, using guidelines provided by HUD. HUD establishes
income limits by family size for the area in which the PHAs
are located. All families must meet the program’s income
criteria before eligibility will be determined. A family’s
income must be within the income limits of the initial PHA’s
area at the time the family receives the voucher. Once the
PHA determines the applicant is eligible to receive a Section
8 Voucher, the PHA calculates the family’s Housing
Assistance Payment (HAP) based on the family’s adjusted
income and Federal allowances. HUD regulations allow a
family with a Section 8 Housing Choice Voucher to lease a
unit outside of the jurisdiction of an initial PHA using certain
procedures called portability.
The enabling legislation for PHAs, Massachusetts General
Portability Regulations Do Law Chapter 121B, does not define the jurisdiction for
not Apply in Massachusetts PHAs. A PHA brought the issue of jurisdiction before the
Federal District Court of Massachusetts. Under a ruling from
the court, PHAs in every municipality in Massachusetts have
the authority to contract for housing anywhere in the State.
HUD provided the information concerning the court ruling to
all of the Massachusetts Executive Directors in a
memorandum dated October 6, 1993. This memorandum
advised that the initial PHA may enter into and administer a
HAP contract for a unit located outside of the PHA’s
municipality; even if the housing is in a municipality of
another PHA that already operates a Section 8 certificate or
voucher program. When the initial PHA in Massachusetts is
presented with a request for Section 8 lease approval, the
initial PHA may directly administer assistance for the family
Page 3 2002-BO-1005
Finding 1
and deal directly with the owner, or develop other
arrangements to administer the certificate or voucher. Since
Massachusetts PHAs have statewide jurisdiction, Federal
portability procedures allowing a family to be absorbed by a
new municipality’s PHA upon relocation to that municipality
are not applicable when a family moves within
Massachusetts.
Portability Vouchers During 2000, the CHA absorbed 86 Portability Vouchers
Absorbed without from 33 PHAs without obtaining permission from
Following Applicable Massachusetts PHA or providing notification to out-of-state
Regulations PHAs. For the 26 PHAs in Massachusetts, the CHA failed
to follow HUD’s instructions that portability procedures do
not apply to tenants moving from one municipality to another
within Massachusetts. For the seven out-of-state PHAs, the
CHA did not have documentation to show that they notified
the PHAs of the absorption. By not following the
appropriate regulations, the CHA caused some of the initial
PHAs to continue to forward HAP payments to the CHA.
As a result, CHA received two payments for a single
subsidized family - one payment from the PHA that issued
the voucher and one payment from HUD.
In addition, CHA did not properly notify initial PHAs that
they had terminated some vouchers. The CHA maintains an
Accounts Receivable consisting of subsidiary balances for
each PHA for payments associated with the absorbed and
terminated vouchers. As of August 17, 2001, this Accounts
Receivable had a credit balance of $239,488 consisting of
overpayments from 34 initial PHAs (see Appendix B).
These overpayments consisted of subsidiary CHA credit
balances of $226,676 from 28 PHAs in Massachusetts and
$12,812 from six out-of-state PHAs. As a result, some of the
initial PHAs were unable to assist families on their waiting
lists because the PHAs believed that the terminated vouchers
were still in use.
During the year 2000, the CHA absorbed 21 vouchers and
Overpayment to One PHA terminated 12 vouchers from one Massachusetts PHA
Exceeded $211,000 without properly notifying that PHA of all of the absorptions
and terminations. The CHA sent this PHA a notice on May
10, 2001 stating that CHA was receiving HAP payments for
22 of their 33 vouchers for over a year after they had been
absorbed or terminated. This notice disclosed that the
absorptions took place on July 1, 2000 and the terminations
2002-BO-1005 Page 4
Finding 1
took place between November 1999 and September 2000.
As of May 2001, the CHA owed this PHA $211,911. In
June 2001, this PHA began withholding funds from ongoing
HAP payments until the $211,911 was offset.
The CHA did not reconcile any vouchers during FY 2000.
CHA Attributes Problems The CHA Director of Finance stated that the person
to Staff Turnover and Lack responsible for handling the billing for portable vouchers had
of Supervision little or no supervision because their supervisor left the CHA.
The CHA believes this lack of supervision resulted in
inadequate record keeping and a failure to reconcile vouchers
from other PHAs as required. Turnover of supervisor and
staff resulted in an inadequate ability to train, monitor, and
retain new employees. From June 4, 1997 to February 14,
2000, thirty-one CHA employees vacated positions and
twenty-one employees were hired. Our interviews identified
that many of the managers are new to their positions.
Current staff commented that prior management failed at
providing timely supervision or training for new staff
members. As a result, the CHA could not determine the
reason for the growing Accounts Receivable balance owed to
other PHAs.
If the CHA reconciled the vouchers from other PHAs
regularly, the overpayments could have been handled in a
timely manner.
Page 5 2002-BO-1005
Finding 1
In 24 CFR 982.152(d), HUD regulations state:
HUD May Reduce
Administrative Fee HUD may reduce or offset any administrative fee to the
PHA, in the amount determined by HUD, if the PHA
fails to perform PHA administrative responsibilities
correctly or adequately under the program
In FY 2000, the CHA absorbed 86 vouchers without
providing all PHAs proper notification. During that year
HUD paid the CHA $259,220 in Section 8 administrative
fees. Absorbed vouchers represent approximately 25
percent of the current 345 Section 8 vouchers administered
by the CHA. The CHA is in the process of determining the
accuracy of Accounts Receivable owed to other PHAs. The
CHA has reconciled the Accounts Receivable for the period
of January 1, 2000 to August 17, 2001. For the period of
March 1998 to January 2000, the CHA decided not to
reconcile the Accounts Receivable as it believes that
checking tenant rental charges and other data needed to
identify discrepancies is time consuming.
In our opinion, the CHA’s decision does not adequately
address the problem. Since the CHA did not plan to
reconcile its Accounts Receivable/Payable to other PHAs
for the period of March 1998 to January 2000 when the
supervisory problem in the Section 8 Department became
evident, the CHA should return to HUD the administrative
fees attributable to the administration of the absorbed
vouchers in 1998 and 1999. If the percentage absorbed in
FY 2000 is representative of absorptions in FYs 1998 and
1999, the CHA should return $119,156 to HUD. This
calculation represents the FY 2000 absorption percentage
multiplied by the total administrative fees paid to the CHA
in 1998 and 1999.
Administrative Fee Attributable to Absorptions in FYs 98 and 99
1998 Administrative Fee $217,404
1999 Administrative Fee $259,220
Subtotal $476,624
Absorption Percentage (86 absorbed out of 345 total) 25%
Estimated Administrative Fee related to Absorption $119,156
2002-BO-1005 Page 6
Finding 1
Auditee Comments The CHA advised that they were in the process of returning
all overpayments to the initial PHAs. The CHA also
indicated that they would reconcile the accounts from
January 1998 forward and are currently reconciling the
accounts on a monthly basis. The CHA further stated that
they are complying with regulations requiring the initial
PHA’s (Massachusetts only) permission to absorb vouchers
and will notify the initial PHA’s of terminated vouchers.
OIG Evaluation of The actions taken and planned by the CHA should correct all
Auditee Comments of the deficiencies noted in the finding. The CHA should
provide your staff evidence that the reconciliation is
complete and that all overpayments have been returned to the
initial PHAs.
The draft report contained recommendations 1F, 1G and 1H
concerning monthly reconciliations, permission from initial
PHAs to absorb vouchers, and notification to initial PHAs on
terminated vouchers. We have deleted these three
recommendations based on the CHA’s response.
Recommendations We recommend that you:
1A. Require the CHA to provide your staff an accounting
for all overpayments resulting from absorbed and
terminated vouchers beginning with January 1998.
1B. Require the CHA to assure that all overpayments are
returned to the initial PHAs.
1C. Require the CHA to reconcile the Accounts Owed
To/From Other PHAs from January 1998 forward.
1D. Reduce CHA’s Administrative Fee if CHA is unable
to reconcile Accounts Owed To/From other PHAs
back to January 1998.
1E. Instruct the initial PHAs on the proper accounting of
the returned overpayments.
Page 7 2002-BO-1005
Finding 1
(THIS PAGE LEFT BLANK INTENTIONALLY)
2002-BO-1005 Page 8
Finding 2
Refrigerator Policy Leads to
Families being Overcharged
The Chelsea Housing Authority (CHA) no longer provides refrigerators to tenants in their
Federal family projects. CHA officials stated they were unaware that HUD requires PHAs who
do not provide appliances to: (1) obtain HUD approval for disposing of appliances; and (2)
provide tenants an allowance for maintenance and replacement of appliances. As a result of the
CHA’s non-compliance with HUD requirements, the CHA overcharged needy families as much
as $107,000 over the past eight years.
In December 1993, the CHA’s Board of Commissioners
1994 Resolution Passed
passed a resolution approving a refrigerator policy which
by Board
stated that CHA would no longer provide refrigerators to
the tenants in family units. This policy advises:
As of January 1, 1994, the Authority will no longer
provide nor maintain refrigerators for the households
of the Authority’s conventional family housing . . .
except those households . . . that:
1. Are unable to afford a refrigerator, and that they
have exhausted every public source of funding for
appliances to obtain a refrigerator.
2. Have a disability that requires them to use a
refrigerator that is not a standard size or design,
and they are unable to afford or otherwise obtain
that atypical refrigerator.
The Annual Contributions Contract (ACC) between the
ACC has Covenant Against CHA and HUD states that the CHA shall develop and
Disposition operate all projects covered by this ACC in compliance
with all applicable statutes, executive orders, and
regulations issued by HUD. Section 7 of Part A of the
ACC, Covenant against Disposition and Encumbrances,
states:
The HA shall not demolish or dispose of any project, or
portion thereof, other than in accordance with the
terms of this ACC and applicable HUD requirements . .
Page 9 2002-BO-1005
Finding 2
. the HA shall not in any way encumber any such
project, or portion thereof, without the prior approval
of HUD (Emphasis added).
Appliances such as refrigerators are a portion of a
project.
In addition to the ACC, HUD issued Notice H83-53, PHA’s
Allowances Required for Requests to Phase out the Provision of Major Appliances on
Tenants July 13, 1983. In Section 3 of this Notice, HUD advises that
allowances are required for tenants when the PHA does not
provide appliances. To dispose of and no longer provide
appliances, PHAs must request HUD approval and provide a
written justification identifying substantial cost savings and a
plan that establishes:
Ø A monthly allowance for tenants to provide their own
appliances, and a plan for dealing with tenants who
cannot afford their own appliances.
Ø Plans for the disposition of appliances currently supplied
and for the provision of, and maintenance of, appliances
during the phase-out period.
Ø Estimates of the replacement and maintenance cost for
appliances currently provided, and proposed lease
revisions reflecting the change in ownership of
appliances.
The CHA disposed of 200 refrigerators by transferring
Families Overcharged ownership to Low-Income Public Housing tenants at the
Federal family projects without obtaining HUD’s approval
and without providing these tenants an allowance for
maintenance and replacement of the refrigerators. In
addition, the CHA did not modify the existing leases to
identify that refrigerators were no longer provided. The
CHA officials stated they were unaware that HUD approval
was required for disposing of the appliances, or that HUD
requires PHAs to provide tenants an allowance for
maintaining and replacing those appliances not provided by
the PHA. As a result, the CHA overcharged families as
much as $107,000 by not providing either a refrigerator for
each unit or an allowance for the family to purchase and
maintain their own refrigerator.
2002-BO-1005 Page 10
Finding 2
The CHA provides an allowance for appliances in another
Section 8 Families Receive HUD-funded housing program it administers – the Section 8
an Allowance Program. Beginning November 2001, the CHA provided
Section 8 families an allowance of $13 per month when the
Section 8 landlord does not provide a refrigerator. Prior to
November 2001, this allowance was $5 per family per
month. In our opinion, the CHA Public Housing tenants
should receive an allowance similar to the CHA Section 8
tenants. Using the same allowances, the CHA would need to
reimburse Public Housing tenants as much as $107,000 for
the period of January 1994 to March 2002, as shown below:
Building 11/1/01 to 01/1/94 to Total per
Name Units 03/31/02 10/31/01 Building
Mace 95 $6,175 $44,650 $50,825
Scrivano 105 $6,825 $49,350 $56,175
Total 200 $13,000 $94,000 $107,000
Auditee Comments The CHA has contracted with a private vendor to revise their
Utility Allowance schedule, including an allowance for
refrigerators. The CHA indicated agreement with
reimbursing current and prior tenants for occupancy between
January 1, 1994 and July 31, 2002. The CHA also advised
that they are following HUD regulations in revising their
lease.
OIG Evaluation of CHA’s planned actions will address our six
Auditee Comments recommendations once these actions are completed.
However, you should obtain assurances from the vendor
providing the refrigerator allowance that the allowance is for
maintaining and replacing the refrigerator and not for
electricity.
Recommendations We recommend that you require the CHA to:
2A. Determine an appropriate monthly allowance to
cover the additional costs incurred by tenants for
owning their refrigerators.
2B. Submit this allowance and appropriate
documentation to your staff for approval.
Page 11 2002-BO-1005
Finding 2
2C. Reimburse all current and former tenants for this
monthly allowance multiplied by the duration of their
tenancy from January 1, 1994 to July 1, 2002.
2D. Reduce the rent of current tenants by the amount of
the monthly allowance.
2E. Publish a legal notice advising former tenants of their
entitlement to reimbursement provided they can
document the duration of their tenancy between
January 1, 1994 and July 31, 2002.
2F. Submit for your approval a revised tenant lease
identifying that the CHA is not providing
refrigerators. Upon HUD’s approval, CHA needs to
execute these revised leases with its tenants.
2002-BO-1005 Page 12
Finding 3
Inadequate Accounting for
Capital Fund Transactions
The Chelsea Housing Authority (CHA) did not properly account for receipts and disbursements in
its Capital Fund Program (CFP) for 2000. For 2000, the CHA requisitioned $406,206 and
disbursed $459,707 under the CFP. Through its Revolving Fund, the CHA borrowed funds from
other programs to fund the CFP for several years. Additionally, the CHA has not requisitioned all
funds from HUD for their CFP. As of June 30, 2001, the CHA has recorded a total payable to the
other programs of $606,896, which it cannot validate until it completes a reconstruction of the
account. As a result, the CHA cannot assure that disbursements under the CFP are accurate, timely
or valid.
HUD Requirements The Annual Contributions Contract between the CHA and
HUD, Part A, Section 15 (A), Books of Account, Records,
and Government Access states:
The HA must maintain complete and accurate books of
account for the projects of the HA in such a manner as to
permit the preparation of statements and reports in
accordance with HUD requirements, and to permit
timely and effective audit.
Standards for Financial Management Systems, 24 CFR
85.20, paragraph (b) (6) states:
Accounting records must be supported by such source
documentation as cancelled checks, paid bills, payrolls,
time and attendance records, contract and sub grant
award documents, etc.
Cost Principles for State, Local, and Indian Tribal
Governments, OMB circular A-87, Attachment A, paragraph
C. 1 provides the factors affecting allowability of costs.
Among other items costs must:
Be necessary and reasonable for proper and efficient
performance and administration of Federal awards.
Be adequately documented.
Page 13 2002-BO-1005
Finding 3
The Comprehensive Grant Program (CGP) was the primary
Program Name Changes source of modernization funds for physical improvements to
public housing units through 1999. In 2000, the Quality
Housing and Work Responsibility Act of 1998 (incorporated
into 1999 HUD budget) replaced CGP funding with the CFP.
For the purpose of this report, CFP is used to refer to funds
from both programs.
For 2000, the CHA could not support requisitions or
Requisitions and disbursements for their CFP. The current Director of
Disbursements not Finance, who joined CHA in December 2000, advised that
Documented for 2000 the CHA would need to reconstruct the account. The former
Assistant Director, who was previously responsible for
maintaining the documentation, left the CHA in November
2000. For the year ending December 31, 2000, the CHA
recorded requisitioned funds of $406,206 and disbursements
of $459,707.
The CHA maintains a Revolving Fund to provide financing
for continuous operations. This financing derives from the
grants and subsidies received. Expenditures through the
Revolving Fund must be charged back to the appropriate
grant or subsidy. The CHA has been resourcing funds in the
Revolving Fund to pay for shortfalls in the CFP. To record
the amount resourced, CHA created an Interfund Accounts
Payable from CFP to the Revolving Fund.
The Interfund Accounts Payable due from the CFP to the
Revolving Fund totaled $606,896 as of June 30, 2001. The
Director of Finance advised that the CHA could not validate
the Accounts Payable until the CHA completed a
reconstruction of the CFP account. The Director of Finance
stated that the shortfall that led to an increase in the Accounts
Payable for 2001 resulted from expending funds for CFP
without requisitioning all CFP funds from HUD. The CHA
advised that it did not requisition CFP funds for allowed
Administrative Costs and Management Improvement Costs
until September 2001 due to its lack of experience with the
requisition process. The CHA’s failure to requisition funds
timely from HUD resulted in: (1) lost interest income, (2)
expenditures exceeding requisitions and (3) unsupported
costs.
2002-BO-1005 Page 14
Finding 3
Auditee Comments The CHA advised that: (1) the CFP requisitions and
disbursements have been reconciled and fully requisitioned,
and (2) all funds owed to the revolving fund have been
repaid. In addition, the CHA advised that they are currently
requisitioning administrative and management costs timely.
OIG Evaluation of The CHA should provide documentation evidencing the
Auditee Comments reconciliation and the overpayment to the Revolving Fund
for your staff’s review. Based on the CHA’s response and
review of recent requisitions, we have deleted the
recommendation in our draft report concerning timely
requisitions of administrative and management improvement
costs.
Recommendations We recommend that you require the CHA to:
3A. Reconcile requisitions and disbursements to their
CFP Program from January 2000 forward and
provide documentation to support the reconciliation
for your staff’s review.
3B. Provide evidence that the amount borrowed from the
Revolving Fund has been repaid from the CFP fund.
Page 15 2002-BO-1005
Finding 3
(THIS PAGE LEFT BLANK INTENTIONALLY)
2002-BO-1005 Page 16
Management Controls
In planning and performing our audit, we considered the management controls of the Chelsea
Housing Authority (CHA) that were relevant to our audit objectives. We reviewed the CHA’s
management control systems to determine our auditing procedures and not to provide assurance on
management controls.
Management controls include the plan of organization, methods and procedures adopted by
management to ensure that resource use is consistent with laws, regulations and policies; that
resources are safeguarded against waste, loss and misuse; and that reliable data is obtained,
maintained and fairly disclosed in reports.
We determined the following management controls were
Relevant Management relevant to our audit objectives:
Ø General administration and accounting controls
Ø Safeguards over assets and records
Ø Section 8 Program
Ø Capital Fund Program
Ø Procurement and Contracting
Ø Admissions and Occupancy
Ø Tenants Accounts Receivables and Security Deposits
A significant weakness exists if management controls do
Significant Weakness not provide reasonable assurance that resource use is
consistent with laws, regulations and policies; that
resources are safeguarded against waste, loss and misuse;
and that reliable data is obtained, maintained and fairly
disclosed in reports.
Our review identified significant weaknesses in management
Assessment Results controls over Section 8 vouchers, disposal of refrigerators
and administration of the Capital Fund Program. These
weaknesses are described in the Findings and
Recommendations section of this report.
Page 17 2002-BO-1005
Management Controls
(THIS PAGE LEFT BLANK INTENTIONALLY)
2002-BO-1005 Page 18
Appendix A
Schedule of Questioned Costs
Findings Ineligible Costs 1/ Unsupported Costs 2/
1- Overpayments on Section 8 Portability Vouchers $239,488
1- Administrative Fees Earned in 1998 and 1999 $119,156
2 - CHA Refrigerator Policy causes Families to be Overcharged $107,000
Total $346,488 $119,156
1/ Ineligible costs are costs that are questioned because of an alleged violation of a
provision of a law, regulation, contract, grant, cooperative agreement, or other
agreement or document governing the expenditure of funds.
2/ Unsupported costs are costs whose eligibility cannot be clearly determined during
the audit since such costs were not supported by adequate documentation.
Page 19 2002-BO-1005
Appendix A
(THIS PAGE LEFT BLANK INTENTIONALLY)
2002-BO-1005 Page 20
Appendix B
Portability Accounts Receivable as of
August 17, 2001
Massachusetts PHAs
1 $10,497
2 $27,970
3 $1,031
4 $127,200
5 $1,297
6 $335
7 $258
8 $720
9 $634
10 $1,146
11 $10,016
12 $958
13 $4,981
14 $2,018
15 $466
16 $2,687
17 $4,373
18 $745
19 $171
20 $5,275
21 $18
22 $2,765
23 $12,798
24 $27
25 $223
26 $4,644
27 $179
28 $3,244
Subtotal $226,676
Out of State PHAs
1 $2,262
2 $7,182
3 $36
4 $650
5 $2,646
6 $36
Subtotal $12,812
Total $239,488
Page 21 2002-BO-1005
Appendix B
2002-BO-1005 Page 22
Appendix C
Auditee Comments
Page 23 2002-BO-1005
Appendix D
2002-BO-1005 Page 24
Appendix C
Page 25 2002-BO-1005
Appendix D
(THIS PAGE LEFT BLANK INTENTIONALLY)
2002-BO-1005 Page 26
Appendix D
Distribution Outside HUD
The Honorable Joseph Lieberman, Chairman, Committee on Government Affairs
The Honorable Fred Thompson, Ranking Member, Committee on Governmental Affairs
Sharon Pinkerton, Senior Advisor, Subcommittee on Criminal Justice, Drug Policy & Human
Resources
Andy Cochran, House Committee on Financial Services
Clinton C. Jones, Senior Counsel, Committee on Financial Services
Kay Gibbs, Committee on Financial Services
Stanley Czerwinski, Director, Housing and Telecommunications Issues, U.S. GAO
Steve Redburn, Chief Housing Branch, Office of Management and Budget
Linda Halliday, Department of Veterans Affairs, Office of Inspector General
William Withrow, Department of Veterans Affairs, OIG Audit Operations Division
George Reeb, Assistant Inspector General for Health Care Financing Audits
The Honorable Dan Burton, Chairman
Committee on Government Reform, 2185 Rayburn Building
House of Representatives, Washington, D.C. 20515
The Honorable Henry A. Waxman, Ranking Member
Committee on Government Reform, 2204 Rayburn Building,
House of Representatives, Washington, DC 20515
Page 27 2002-BO-1005
Appendix D
(THIS PAGE WAS LEFT BLANK INTENTIONALLY)
2002-BO-1005 Page 28
Chelsea Housing Authority Chelsea, Massachusetts
Published by the Department of Housing and Urban Development, Office of Inspector General on 2002-09-30.
Below is a raw (and likely hideous) rendition of the original report. (PDF)