oversight

Housing Choice Voucher and Low-Income Public Housing Program Deficiencies at the Bridgeport Housing Authority, Bridgeport, Connecticut, Resulted in $3.8 Million in Questioned Costs

Published by the Department of Housing and Urban Development, Office of Inspector General on 2005-07-29.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 AUDIT REPORT




  Housing Choice Voucher and Low-Income Public Housing
  Program Deficiencies at the Bridgeport Housing Authority,
Bridgeport, Connecticut, Resulted in $3.8 Million in Questioned
                            Costs

                        2005-BO-1004

                        July 29, 2005

                  OFFICE OF AUDIT, REGION 1
                          Boston, MA
                                                                Issue Date July 29, 2005


                                                                Audit Report Number 2005-BO-1004




TO:         Donna J. Ayala, Director, Office of Public Housing, Boston, MA, Regional
              Office, 1APH



FROM:       John A. Dvorak, Regional Inspector General for Audit, 1AGA

SUBJECT: Housing Choice Voucher and Low-Income Public Housing Program
           Deficiencies at the Bridgeport Housing Authority, Bridgeport, Connecticut,
           Resulted in $3.8 Million in Questioned Costs


                                   HIGHLIGHTS

 What We Audited and Why

             We audited the Bridgeport Housing Authority’s (Authority) Section 8 Housing
             Choice Voucher (Voucher) and low-income public housing programs. The audit
             was conducted because recent U.S. Department of Housing and Urban
             Development (HUD) rental integrity management reviews and independent public
             accountant audit reports identified program deficiencies. Our audit objective was
             to determine whether the programs were administered according to program
             requirements.


 What We Found
             The programs were not administered according to program requirements. As a
             result, the Authority
                 •   Mismanaged the $1.5 million purchase and renovation of additional Office
                     space.




                                             1
               •     Spent $2.6 million on the Pembroke green development project, of which
                     $1.3 million failed to benefit eligible families.
               •     Improperly used $636,811 in low-income public housing funds for
                     voucher program expenses.
               •     Improperly charged $409,311 in administrative costs to the Voucher
                     program.
               •     Did not properly calculate and support housing assistance payments.

           We identified questioned costs and opportunities for funds to be put to better use
           totaling $3.8 million (see appendix A).


 What We Recommend

           We recommend that the Regional Office of Public Housing, Boston,
           Massachusetts, require the Authority to
           •   Justify the acquisition and use of the 215 Warren Street office space or sell the
               property.
           •   Implement procedures to ensure that only eligible families own and rent
               Pembroke Green housing units or repay the $1.3 million in HUD funds used
               to develop the project that did not benefit eligible families.
           •   Repay $636,811 to the low-income public housing program for funds used for
               the Voucher program.
           •   Implement an equitable cost allocation plan and accounting procedures to
               allocate expenses to the benefiting programs and reimburse its Voucher
               program $409,311 for ineligible costs charged to the program.
           •   Adequately implement its quality control procedures to ensure housing
               assistance payments are properly calculated and supported.

            For each recommendation in the body of the report without a management
            decision, please respond and provide status reports in accordance with HUD
            Handbook 2000.06, REV-3. Also, please furnish us copies of any
            correspondence or directives issued because of the audit.

Auditee’s Response
           The Authority generally agreed with the deficiencies in this report and agreed to
           take corrective actions. The complete text of the auditee’s response, along with
           our evaluation of that response, can be found in appendix B of this report. The
           Authority also provided exhibits with its response that are available for review
           upon request.



                                              2
                              TABLE OF CONTENTS

Background and Objectives                                                             4

Results of Audit
        Finding 1 The Authority Mismanaged the $1.5 Million Purchase and              5
                  Renovation of 215 Warren Street

        Finding 2 The Authority Spent $2.6 Million on the Pembroke Green              8
                  Development Project, $1.3 Million of Which Failed to Benefit
                  Eligible Families

        Finding 3 The Authority Improperly Used $636,811 in Low-Income Public         10
                  Housing Funds for Voucher Program Expenses

        Finding 4 The Authority Improperly Charged $409,311 in Administrative Costs   13
                  to the Voucher Program

        Finding 5 The Authority’s Voucher Program Tenant Files Contained Many         17
                  Deficiencies

        Finding 6 The Authority Did Not Write Off $114,081 in Uncollectible           20
                  Portability Accounts

Scope and Methodology                                                                 21


Internal Controls                                                                     22


Appendixes
   A. Schedule of Questioned Costs and Funds to Be Put to Better Use                  24
   B. Auditee Comments and OIG’s Evaluation                                           25
   C. Schedule of Pembroke Green Tenant Eligibility                                   35
   D. Schedule of Ineligible Salary/Benefits Costs                                    36
   E.   Schedule of Ineligible Other Administrative Costs                             37
   F.   Schedule of Ineligible Public Relations Costs                                 38
   G. Schedule of Tenant File Errors                                                  39



                                               3
                     BACKGROUND AND OBJECTIVES

The Bridgeport Housing Authority (Authority) was created under the United States Housing Act
of 1937 and Section 8-40 of the Connecticut General Statutes to provide low-income public
housing for qualified individuals. The Authority is headed by an executive director and
governed by a board of commissioners (board) appointed by the mayor of the City of Bridgeport,
Connecticut. The board dismissed the Authority’s executive director in December of 2003,
appointed two acting interim executive directors, and ultimately hired a permanent executive
director in June of 2005.

The Authority administers one of the largest Section 8 Housing Choice Voucher (Voucher)
programs in Connecticut. It received more than $49 million in Voucher program funds from the
U.S. Department of Housing and Urban Development (HUD) to support vouchers for more than
2,600 families in fiscal years 2002 through 2004. The Authority assists low-income families in
renting affordable housing with federal subsidies under the Voucher program. Under the
program, eligible families select and rent units that meet HUD housing quality standards. If the
Authority approves a family’s unit and tenancy, it contracts with the owner to make rent subsidy
payments on behalf of the family.

The Authority must operate its Voucher program according to the rules and regulations
prescribed by HUD in accordance with the United States Housing Act of 1937, as amended. The
rules and regulations detail eligibility requirements for participating families and prescribe the
method for determination of rent subsidy levels based upon each family’s income and other
factors.

The Authority also administers one of the largest low-income public housing programs in the
state of Connecticut with 2,686 units.

Our overall audit objective was to determine whether the programs were administered according
to program requirements. Our specific audit objectives were to determine whether
   •   The Authority justified and effectively and efficiently managed the $1.5 million spent to
       purchase and renovate its 215 Warren Street office space,
   •   The $2.6 million spent on the Pembroke Green development project benefited eligible
       families,
   •   The Authority accurately accounted for its administrative fee reserve account and spent
       its administrative fees on reasonable and necessary expenses,
   •   The Authority’s cost allocation plan and expenses charged to the Voucher and low-
       income public housing programs were reasonable,
   •   The Authority’s Voucher program tenant files contained adequate documentation
       supporting tenant eligibility and housing assistance payment calculations, and
   •   The Authority’s Voucher program portability accounts were collectible.




                                                4
                                 RESULTS OF AUDIT

Finding 1: The Authority Mismanaged the $1.5 Million Purchase and
Renovation of 215 Warren Street
The Authority mismanaged the $1,465,688 in Voucher program funds used to purchase,
renovate, and furnish excess office space at 215 Warren Street. It also failed to effectively
manage the renovation of the building or complete the building renovation in a reasonable
period. These conditions occurred because the Authority lacked effective controls over the
acquisition, renovation, and use of facilities. As a result, the Authority did not have a needs
assessment to show the required administrative office space for its programs, and now has an
additional 14,562 square feet of office space that it must maintain and find a use for that is both
practical and beneficial to the administration of the Voucher program. Similarly, it did not
access the renovation needed before purchasing the property and faces redesign problems,
contract completion delays, and significant added costs. As of May 9, 2005, the facilities are still
under renovation. In addition, the Authority depleted its administrative fee reserve account due
to the renovation costs and did not have sufficient funds to pay Voucher program staff salaries,
which they paid using funds from other programs (see finding 3).


 The Authority Invested
 $1,465,688 in HUD Funds to
 Purchase Excess Office Space

               As of September 30, 2004, the Authority had invested $1,465,688 in Voucher
               program funds to purchase, renovate, and furnish office space at 215 Warren
               Street. The purchase and renovation cost $1,368,673, and office furniture cost
               $97,015. The Authority acquired the office space primarily for its Voucher
               program’s Section 8 department, which had outgrown the office space at the
               Authority’s main administration building. The Authority also planned to move its
               scattered site office staff and Voucher program inspectors to the new building.
               However, the Authority did not conduct a comprehensive needs assessment or
               develop a facilities plan to establish the office space needed and the space
               requirements before the purchase.

               The Authority’s Voucher program, scattered sites, and Voucher program
               inspectors occupy 3,252 square feet of office space in the main administrative
               building. By contrast, the 215 Warren Street property contains 14,562 square feet
               of office space, approximately 10,000 square feet of which was planned to be
               allocated for the three offices. This represents an expansion to three times the
               current space. Without a facility plan or needs assessment, the Authority could
               not support the necessity or reasonableness of the additional office space.




                                                 5
The Authority Is Unable to
Show Whether Purchase Was
Economical and Practical


            The Authority purchased the 215 Warren Street property without documenting its
            rationale for purchasing the additional office space rather than leasing office
            space or reconfiguring current office space. Without justifying that purchasing
            the office space was the most economical and practical choice, the Authority
            cannot demonstrate the reasonableness and necessity of the acquisition and
            renovation costs.
            The Authority agreed that the purchase was not adequately planned. To ensure it
            can utilize this property space, they advised us that they would hire a professional
            architect or space design firm to prepare a space utilization plan. In the interim,
            the Authority indicated that it would use one-half of the 215 Warren Street’s
            office space for the Voucher program and the other half for redevelopment and
            modernization, housing management, central maintenance, and procurement
            activities.

Architect Selected without
Competition

            The Authority awarded a design contract for the renovation of the 215 Warren
            Street property to an architect firm without competition. In its approval of the
            award, the Board cited that they wanted a new perspective on designing the layout
            of building, but this approval violated the Authority’s procurement policy.
            Without competing and evaluating prospective architects the Authority provided
            no assurance that, the best quality and economic services were obtained.

Renovation Costs Increased


            The Authority purchased the Warren Street property at a cost of $795,000 in May
            2002. The former executive director told the board that the project would not
            require significant renovations. However, the original renovation contract was
            awarded for $385,000. To date, the Authority has spent almost $700,000 to
            renovate and furnish the property. Our discussions with the contractor and the
            Authority found that the renovation needed was not fully determined by Authority
            management prior to the purchase of the Warren Street. They also said that
            significant design problems contributed to project completion delays including a
            leaky roof, enhancing the electrical system, modifying the handicap bathroom,
            and modifications to the to the building to re-enforce it’s structure to
            accommodate an elevator for handicap accessibility. Several items still need to
            be addressed, such as a long-term solution to the roof leakage, parking lot paving,
            and enhancing the structural integrity of the outside stairway. As of May 9, 2005,


                                              6
             the project was not complete or suitable for occupancy and was more than two
             and a half years behind schedule.

Conclusion

             The Authority did not have effective controls for the acquisition, renovation, and
             use of facilities it purchased. As a result, the Authority mismanaged $1,465,688
             in Voucher program funds by using the funds to purchase, renovate, and furnish
             excess office space at 215 Warren Street. The Authority now has an additional
             14,562 square feet of office space that it must maintain and find a use for that is
             both practical and beneficial. Further, they mismanaged the determination of
             need for building renovation, and the redesign resulted in contract delays and
             significant added costs. The Authority should complete a usage plan to justify
             purchasing and renovating the office space. It should also show it was the most
             economical and practical choice, and demonstrates the reasonableness and
             necessity of the acquisition and renovation costs. The justification must consider
             the $1.5 million in sunk costs and the operating, maintenance, and modernization
             costs. In addition, the Authority depleted its administrative fee reserve account
             and did not have sufficient funds to pay essential Voucher program staff salaries
             without using funds from other programs because of the acquisitions (see
             Finding_3).

Recommendations

             We recommend that the Regional Office of Public Housing, Boston,
             Massachusetts, require the Authority to

             1A. Develop and implement policies and procedures to ensure the economic and
             efficient use of facilities, including comprehensive facilities and renovation plans
             to determine the Authority’s office space requirements and address all future
             operating and modernization costs, including the newly acquired 215 Warren
             Street property.

             1B. Allocate the acquisition and renovation costs to the benefiting programs if
             the facilities and renovation plans justify keeping 215 Warren Street or sell 215
             Warren Street if the facilities plan does not justify the cost of acquiring,
             renovating, and maintaining the facility, which will result in funds to be put to
             better use up to the $1,465,688 investment.




                                               7
Finding 2: The Authority Spent $2.6 Million on the Pembroke Green
Development Project, $1.3 Million of Which Failed to Benefit Eligible
Families
The Authority failed to ensure that only low- and moderate-income families used Pembroke
Green’s 21 duplexes. Homeownership and rental opportunities were instead provided to persons
whose income eligibility was not verified or persons whose annual income exceeded eligibility
thresholds. This occurred because the Authority did not establish adequate procedures to ensure
that only eligible individuals took advantage of the homeownership and rental opportunities. As
a result, intended goals were not achieved, and we questioned the $1,284,570 used to develop the
housing units.


 The Authority Invested
 $2,569,155 in HUD Funds

              The Authority developed Pembroke Green to produce 21 duplexes of affordable
              housing with 21 homeownership units and 21 rental units. It spent a total of
              $2,569,155 in HUD funds on the development. The federal subsidy for each unit
              was $61,170 per unit. The Authority’s goal was to produce affordable housing
              that would afford first-time low-income families from the public housing and
              Section 8 programs and the general public the opportunity to purchase the 21
              duplex style homes. Homebuyers would occupy one of the units and rent the
              adjacent unit to a Voucher program tenant referred to the homeowner by the
              Authority. The guaranteed rental income generated by the Voucher program
              tenant would help ensure that the low-to-moderate-income owner could afford the
              mortgage. The homebuyer also had the option to forgo the guaranteed Voucher
              program rental income and rent the adjacent unit to a low-income tenant if the
              Authority certified that the tenant was income eligible.

Resale Restrictions Required
Low-Income Purchasers and
Tenants

              The purchase agreement signed by the Authority and homebuyers incorporated a
              declaration of restrictive covenants and resale agreements. These legal
              documents established the Authority’s and owner’s responsibilities. Under the
              agreement, the Authority was required to establish that prospective purchasers
              were persons and families whose income was no more than 80 percent of the
              area’s median income. Owners had to rent their adjacent units to income-eligible
              tenants. Prospective tenants had to be persons or families who would pay up to
              30 percent of their annual income for housing, and their income had to be no more
              than 50 percent of the area’s median income. However, the Authority did not
              establish procedures to ensure compliance with the covenant’s restrictions on



                                               8
                     owner and tenant income. The Authority’s records showed that of the 42 housing
                     units developed,
                     •   Three housing unit owners exceeded the income eligibility thresholds,
                     •   Five housing unit owners had not established that they were income eligible,
                         and
                     •   Thirteen rental unit tenants had not established that they were income eligible.

                     For the three units provided to ineligible owners, the use of $183,510 in HUD funds
                     spent to develop the units is considered a questioned cost. These costs clearly fail to
                     satisfy program goals and are ineligible program costs. In addition, the Authority
                     failed to substantiate the income for five other owners and 13 tenants. The Authority
                     expended $1,101,060 to develop these units, which is also considered a questioned
                     cost.1

    Recommendations

                     We recommend that the Regional Office of Public Housing, Boston,
                     Massachusetts, require the Authority to

                     2A. Establish and implement procedures to ensure that owners and tenants are
                     income eligible in accordance with the declaration of restrictive covenant and
                     resale agreement.

                     2B. Repay the low-income operating fund $183,510 for the three units sold to
                     ineligible owners.

                     2C. Repay the low-income operating fund $1,101,060 or support the income
                     eligibility for the five purchased units and 13 rental units that were not supported.




1
    See appendix C for a list of ineligible and unsupported costs/units.


                                                              9
Finding 3: The Authority Improperly Used $636,811 in Low-Income
Public Housing Funds for Voucher Program Expenses
The Authority did not comply with federal regulations and its annual contributions contract when
it used low-income public housing funds to pay for Voucher program expenses. The low-income
public housing program funds can only be used for low-income public housing program costs.
The Authority used low-income public housing funds because it had not properly accounted for
$1,465,003 in expenditures that should have been recorded as expenditures from the Authority’s
administrative fee reserve account during fiscal years 2002, 2003, and 2004. The failure to
properly account for expenditure was the result of inadequate controls over the accounting and
reporting of the Voucher program’s administrative fee reserve account, and low-income public
housing expenditures. If the Authority had properly recorded the expenditures to pay for the
Warren Street property mortgage, they would have known that the administrative fee reserve
account was depleted. However, the Authority believed it had funds in its reserve account to
reimburse the low-income public housing program, when it used $636,811 from the low-income
public housing program to pay for Voucher program salaries and administrative expenses. As a
result, it could not reimburse the low-income public housing program, and the $636,811 was not
available to support low-income public housing program.



 Reserves Were Overstated to
 the Real Estate Assessment
 Center

              We identified significant accounting and reporting errors that contributed to the
              Authority’s improper use of low-income public housing funds for the Voucher
              program. Each year, the Authority reports its “unrestricted net assets” or
              administrative fee reserve account on financial statements submitted to HUD’s
              Real Estate Assessment Center. HUD uses these statements to determine the
              amount of funding received by the housing authority. However, the Authority
              failed to report $1,361,631 invested in the Warren Street property. Thus, the
              $945,200 in administrative fee reserves the Authority reported for fiscal year 2004
              was overstated by $1,361,631 and should have been reported as a deficit balance
              of $416,431. The chief financial officer agreed that an error had occurred and the
              Real Estate Assessment Center statement must be resubmitted. Our review
              showed that the balance should be further adjusted as discussed below.

 Reserves Were Consistently
 Overstated on Annual Operating
 Statements

              In addition to the financial statements submitted to HUD’s Real Estate
              Assessment Center, the Authority reports its administrative fee reserve account
              balance to HUD on HUD Form 52681, the “Voucher for Payment of Annual
              Contributions and Operating Statement.” Our review of the operating statements


                                              10
              for fiscal years 2002, 2003, and 2004 showed that the Authority did not deduct
              withdrawals totaling $1,465,003 from its administrative fee reserve account as
              required. Thus, the account balance was consistently overstated to HUD. The
              $1,465,003 was expended as follows:
                  •   $1,368,673 for the purchase and renovation of 215 Warren Street,
                  •   $83,209 for construction costs at Pembroke Green, and
                  •   $13,121 for office furniture at the public housing scattered sites office.

The Authority Spent Public
Housing Funds to Pay Voucher
Program Expenses

              The adminstrative reserve fee account was in deficit as of the end of fiscal year
              2003, and funds were not available for fiscal year 2004. However, in January of
              2004, the board approved Voucher program funds to pay off the mortgage note
              for its 215 Warren Street property. The expenditure was intended to save
              $230,000 in interest payments during the loan period but was the largest factor
              increasing the deficit. In additon, the Authority used $636,811 from the low-
              income public housing program to pay Voucher program expenses in violation of
              its annual contributions contract with HUD. As a result, $636,811 was not
              available to support low-income public housing program tenants.

 The Authority submitted
 Revised Financial Statements

              Following our fieldwork the Authority submitted a corrected fiscal year 2004
              REAC Statement and HUD Voucher for Payment of Annual Contributions and
              Operating Statement. Therefore, we consider that recommendation 3D has been
              implemented and final action will be recorded in the departmental audit resolution
              tracking system upon report issuance.

 Conclusion

              The Authority did not have sufficient funds to pay Voucher program expenses,
              and used $636,811 in low-income housing program contract to pay the Voucher
              program expenses. These funds must be repaid to the low-income public housing
              program. The use of low-income public housing funds to pay Voucher program
              expenditures occurred because there was a lack of adequate controls to ensure that
              only low-income public housing expenditures were paid using these program
              funds. Similarly, the Authority depleted its administrative fee reserve account to
              purchase and renovate the office space at 215 Warren Street because the
              Authority did not have adequate control over its accounting and reporting of the
              administrative fee reserve account. As a result, they did not properly account for
              expenditure that should have been charged to the account. This failure to properly


                                               11
          account for expenditures also resulted in the Authority filing incorrect financial
          statement with HUD’s Real Estate Assessment Center because the “invested in
          capital assets” and “unrestricted net assets” balances were incorrectly reported for
          fiscal year 2004


Recommendations

          We recommend that the Regional Office of Public Housing, Boston,
          Massachusetts, require the Authority to

          3A. Reimburse the low-income public housing program $636,811 for funds used
          to pay Voucher program costs at the end of fiscal year 2004.

          3B. Revise and strengthen internal controls to ensure that the low-income public
          housing program funds are only used to pay for this program’s expenditures.

          3C. Establish and implement procedures to properly account for and report
          administrative fee reserve account activity.

          3D. Revise and submit the Authority’s financial statement to HUD’s Real Estate
          Assessment Center and correctly report its “invested in capital assets” and
          “unrestricted net assets” balances for fiscal year 2004.




                                           12
Finding 4: The Authority Improperly Charged $409,311 in
Administrative Costs to the Voucher Program
The Authority improperly charged administrative costs the to the Voucher program when it
failed to correctly allocate $406,683 in costs and spent $2,628 on unreasonable and unnecessary
expenses. Specifically, the Authority improperly charged $406,683 in other program costs to its
Voucher program as follows:
      •    $327,244 for employee salaries and benefits,
      •    $69,284 for other administrative expenses, and
      •    $10,155 for public relations expenses.
The Authority also charged its Voucher program $2,628 in unnecessary and unreasonable
catering costs for its annual meeting. This occurred because the Authority lacked adequate
accounting procedures to allocate reasonable and necessary expenses to the benefiting programs.
As a result, funds totaling $409,311 were not available for program needs. The Authority
concurred with this assessment and processed correcting entries for fiscal year 2004. The
Authority’s chief financial officer stated that the remaining correcting entries would be processed
for fiscal years 2002 and 2003 upon receipt of this report.


    Inadequate Allocation Resulted
    in $327,244 in Ineligible Costs
    Being Charged

                    A review of $4,000,771 in salaries and benefits identified $327,244 in ineligible
                    costs charged to the Voucher program during the period October 1, 2002, through
                    September 30, 2004. These ineligible costs were for employees who either did
                    not perform Voucher program duties or performed limited duties for the Voucher
                    program. Office of Management and Budget Circular A-87 requires that (1) the
                    distribution of salaries or wages for employees working on multiple activities or
                    cost objectives be supported by personnel activity reports or equivalent
                    documentation and (2) the activity reports must reflect an after-the-fact
                    distribution of the activity for each individual employee. Budget estimates or
                    distribution percentages determined before the services are performed do not
                    support charges to federal programs. The ineligible costs were charged because
                    the Authority lacked an allocation plan or written procedures that properly
                    established and supported the amount of salaries and benefits that should be
                    allocated to each program. In addition, the Authority did not maintain time
                    records to determine the percentage of salaries and benefits that should have been
                    charged to each housing program for fiscal years 2002, 2003, or 2004.2




2
    See appendix D for a complete listing of questioned charges.


                                                          13
    Ineligible Administrative
    Expenses Charged Totaling
    $69,284

                    A review of $99,516 in administrative expenses identified $69,284 in ineligible
                    charges.3 These occurred because adequate accounting procedures were not
                    established to allocate expenses to benefiting programs. For example, Voucher
                    program employees represented only 16 percent of the Authority’s workforce;
                    however, the Authority allocated 50 percent of payroll service costs in fiscal year
                    2002 to the Voucher program and 35 percent of payroll service costs in fiscal year
                    2003. The Authority’s allocation practice charged the unpaid portion of all other
                    administrative expenses to the Voucher program, resulting in the following
                    ineligible Voucher program charges:
                        •    $24,007 paid for payroll service costs,
                        •    $23,808 paid for a senior housing site telephone answering service,
                        •    $11,124 paid for tenant credit reports,
                        •    $6,983 paid for investment services, and
                        •    $3,361 paid for a credit card processing service for public housing tenants.


    Public Relations Expenses
    Totaling $10,155 Were
    Improperly Charged

                    Our review of $59,148 in public relations expenses identified $10,155 in
                    ineligible charges. The majority of ineligible charges related to costs incurred to
                    produce and print the Authority’s resident newsletter. The costs charged to the
                    Voucher program were not appropriate because the newsletter was distributed to
                    public housing residents and Authority staff and not to Voucher program tenants.
                    The Voucher program did not benefit from the Authority’s newsletter. Therefore,
                    the Authority’s allocation of 50 percent of the publication’s costs in fiscal year
                    2003 and 16 percent of the costs charged in fiscal year 2004 were questioned as
                    ineligible program costs.4




3
    See appendix E.
4
    For transaction details See appendix F.



                                                      14
 Unnecessary and Unreasonable
 Costs of $2,628 Were Charged
 for Catering

              The Authority paid a vendor $7,035 to cater its December 2003 annual meeting.
              This cost covered the rental for space, beverages, food, place settings, chefs, and
              servers. The rental charges for the space and beverage costs are reasonable
              expenses, but the food costs and the associated expenses were not a customary or
              necessary cost for a public meeting. The Authority charged 50 percent of the
              catering costs to its Voucher program; however, the food costs and associated
              expenses of $2,628 did not benefit administration of the Voucher program. Thus,
              we determined that the $2,628 charged to the Voucher program was an ineligible
              program cost.

The Authority Repaid
Improper Charges of $409,311

              The Authority agreed with our review and repaid the Voucher program $409,311 for
              improper charges during the audit (152,879 + 253,786). During our fieldwork the
              chief financial officer agreed that costs totaling $152,879 were improperly charged
              to the Voucher program and adjusted the program account’s general ledger for
              $133,594 in salary charges, $16,323 in administrative charges, and $2,980 in
              resident newsletter expenses charged during fiscal year 2004. Following our
              fieldwork, the Authority’s response showed that the remaining $253,786 in improper
              charges was repaid.

              During our fieldwork the chief financial officer provided the Office of Inspector
              General (OIG) the Authority’s fiscal year 2005 operating budget and salary
              allocation plan, and the plan appeared to be reasonable. However, the Authority had
              not established formal procedures to support the plan’s rationale to allocate salaries
              for employees who provide services for more than one housing program as required
              by Office of Management and Budget Circular A-87.


 Conclusion


              The Authority charged its Voucher program for expenses that did not benefit the
              program. During our audit the Authority repaid the Voucher program $409,311
              for expenses we identified as not benefiting the program. Therefore, we consider
              that recommendations 4B and 4C have been implemented and final action will be
              recorded in the departmental audit resolution tracking system upon report
              issuance.
              The salary and benefits costs were not properly charged to the Voucher program
              because the allocation plan used did not establish the appropriate rationale for
              allocating salaries and benefits for employees who worked on multiple housing


                                                15
          programs as required by HUD regulations. Similarly, the administrative and
          public relations costs were not allocated based on their benefit to the Voucher
          program. This occurred because formal written procedures were not established
          to properly allocate costs to the benefiting programs. The procedures should
          include the rationale used and documentation to support the amounts allocated
          and ensure only necessary costs for administering the Voucher program are
          charged to the program.

Recommendations


          We recommend that the Regional Office of Public Housing, Boston,
          Massachusetts, require the Authority to

          4A. Establish and implement formal written procedures to properly allocate costs
          to the benefiting programs and ensure that only necessary costs for administering
          the Voucher program are charged to the program.

          4B. Reimburse the Authority’s Voucher program the remaining $253,786 of the
          $406,683 in ineligible salaries, benefits, and administrative and public relations
          expenses.

          4C. Reimburse the Authority’s Voucher program $2,628 for unnecessary and
          unreasonable catering costs from nonfederal funds.




                                           16
Finding 5: The Authority’s Voucher Program Tenant Files Contained
Many Deficiencies

We estimate that at least 23 percent of the Voucher program’s tenant files contained deficiencies
related to the verification of tenant income and the calculation of housing assistance payments.
These errors occurred despite similar findings reported to the Authority by HUD during prior
reviews, which had prompted the Authority to revise its quality assurance function. However,
we attributed this high rate of errors5 to the Authority’s failure to effectively administer its
quality assurance function. These errors caused tenants and HUD to overpay and underpay their
share of rent, and HUD was not adequately protected from tenants underreporting their income.


    Tenant Files Contained
    Numerous Errors

                    The Voucher program’s tenant files contained a number of deficiencies, such as
                    missing third party income verifications, utility allowance errors, and income
                    calculation errors. As of June 29, 2004, the Authority administered 2,633
                    vouchers under its Voucher program. Our statistical sample of 57 tenant files
                    showed that 18 files contained deficiencies. Thus, based on our statistical sample,
                    an estimated 23 percent or 605 files contained at least one deficiency. These
                    deficiencies negatively impacted the Voucher program and affected the amount of
                    rent paid by tenants and HUD.

    The Authority Inadequately
    Supported Assistance Payments


                    We found that 10 of the 57 tenant files sampled were missing applicable third party
                    verifications. Without third party verifications, the Authority is prevented from
                    determining the tenant’s adjusted annual income and is unable to determine the
                    proper assistance payment. Incorrect assistance payments result in overpayment or
                    underpayment of subsidies and negatively impact HUD and tenants.

    The Authority Improperly
    Calculated Assistance Payments

                    We found that the Authority improperly calculated the tenant’s share of rent and
                    the assistance payment in 8 of 57 tenant files we tested. Thus, assistance
                    payments were not adequately supported. We considered these deficiencies


5
    See appendix G for a listing and frequency of the deficiencies.


                                                            17
            serious in nature because they affected the amount of subsidies paid. These
            incorrect calculations were primarily attributed to errors that included
               •   Failure to process reimbursements for unreported income,
               •   Using incorrect utility allowances,
               •   Not including child support payments as income, and
               •   Computation errors.

            For example, between July 2003 and March 2004, a tenant underpaid the tenant’s
            share of the rent by approximately $265 per month because the tenant failed to
            report the income of a nonstudent dependant over the age of 18. The Voucher
            program clerk identified the error during a recertification; however, the clerk did
            not address the $10,600 in unreported income earned by the dependent. The
            Authority should have recalculated the tenant’s share of rent and obtained
            retroactive reimbursement.

Ineffective Quality Assurance
Reviews

            The Authority’s quality assurance reviews were ineffective. The Authority revised
            its quality assurance function based on HUD’s recommendation to increase
            supervisory oversight and conduct at least a 5-percent quality control review of its
            tenant files monthly. However, we could not determine to what extent the reviews
            were conducted because the Authority did not always document its quality reviews.
            In addition, our file reviews showed that the Authority’s quality reviews were not
            sufficient to detect, correct, or otherwise reduce repeated errors.


 Conclusion


            Our review disclosed that the Authority’s Voucher program continued to have
            deficiencies related to the payment of housing subsidies. The Authority
            inadequately supported and calculated housing assistance payments, leading to
            overpayments and underpayments of HUD subsidies, negatively affecting HUD
            and tenants. These conditions persisted because the Authority lacked an effective
            quality control function to detect and correct errors and omissions.




                                             18
Recommendations


        We recommend that the Regional Office of Public Housing, Boston,
        Massachusetts, require the Authority to

        5A. Revise quality control procedures to ensure that Voucher program housing
        assistance payments are properly supported and calculated.

        5B. Implement procedures that ensure that the recommended minimum quality
        assurance reviews are conducted and documented to detect, correct, and reduce
        repeated errors.

        5C. Correct all errors noted in appendix G.




                                        19
Finding 6: The Authority Did Not Write Off $114,081 in Uncollectible
Portability Accounts
The Authority maintained uncollectible accounts receivable on their books and records and did
not repay entities for overpayments. This occurred because the Authority failed to write off
uncollectible accounts and did not establish procedures to repay entities when overpayments
were received for portability tenants. As a result, the Authority’s financial position was
overstated by $114,081.


Collection Efforts Were
Unsuccessful

              The Authority’s general ledger shows an uncollected net balance of $114,081 for
              the billings and receipts occurring between October 1995 and December 2000.
              This balance represents the amount that entities owe the Authority ($157,551),
              less payments received from other entities ($33,345) and payments received but
              not billed ($10,124).

              The Authority made efforts and sought HUD’s assistance in collecting the
              outstanding receivables and resolving accounts payables. Those efforts were
              mostly unsuccessful, and many of the receivables and overpayments on the
              authority’s records are nearly 10 years old and involve at least 59 entities. Due to
              the age of the receivables, the failure of some entities to respond to inquiries, and
              disputes between the Authority and other entities, collection is unlikely.
              Accordingly, the Authority should write off the uncollectible accounts. It should
              also determine the validity of the overpayments and repay any overpayments it
              owes other entities.

              HUD’s Public and Indian Housing Notice 2004-12, issued on July 19, 2004,
              revised the procedures on portability to ensure that billings are prompt and reduce
              the possibility of retaining aged receivables. These procedures should ensure that
              future payments for tenants with portable vouchers are accounted for properly.


 Recommendations

              We recommend that the Regional Office of Public Housing, Boston,
              Massachusetts, require the Authority to

              6A. Establish policies and procedures that implement HUD’s Public and Indian
              Housing Notice 2004-12 and ensure receivables are evaluated periodically and
              uncollectible accounts are written off.

              6B. Determine whether the amounts owed other entities are valid and pay the
              amount owed.


                                               20
                         SCOPE AND METHODOLOGY

To achieve our audit objectives, we

   •   Reviewed program requirements including federal laws and regulations, Office of
       Management and Budget circulars, the consolidated annual contributions contract between
       the Authority and HUD, and HUD Office of Public and Indian Housing handbooks and
       guidance including the “Housing Choice Voucher Program Guidebook,” HUD 7420.10G;

   •   Reviewed HUD-OIG Audit Report 00-BO-204-1004, dated July 5, 2000, and related
       follow-up files to assess whether the Authority adequately addressed prior OIG findings;

   •   Reviewed the Authority’s annual program reports sent to HUD, including “Estimates of
       Total Required Annual Contributions,” “Vouchers for Payment of Annual Contributions and
       Operating Statements,” assessment program certifications, independent public accountant’s
       reports, and HUD monitoring reviews;

   •   Interviewed Authority and HUD personnel and officials and reviewed meeting minutes from
       the Authority’s board;

   •   Reviewed Voucher program documentation at the Authority, including the administrative
       plan, annual and five-year plans, Voucher program tenant and waiting lists (as of June 29,
       2004), tenant file documentation, and accounting system records;

   •   Evaluated the Authority’s planned use of its property located at 215 Warren Street,
       including its facilities plan/needs assessment and whether the costs for the purchase and
       renovation of the office space were necessary and reasonable; and

   •   Selected a statistical sample of Voucher program tenant files, which we reviewed for
       compliance with tenant income verification and the accuracy of the housing assistance
       payment calculations. The purpose of our testing was to ensure that the participants were
       eligible and that the housing assistance payments were properly supported and calculated.
       To accomplish this, we randomly selected 57 tenant files from a universe of 2,633
       Voucher program tenants as of June 29, 2004, to perform detailed attribute testing. Our
       sample resulted in a confidence level of 90 percent and a precision of 10 percent. Based
       on the errors we found in our sample files, we used the lower confidence limit to estimate
       a 23-percent error rate for the universe of 2,633 files; however, the sampling
       methodology was not designed to estimate the dollar magnitude of the errors.

We performed our fieldwork between June and December 2004. We conducted the majority of
our fieldwork at the Authority’s office located at 150 Highland Avenue in Bridgeport,
Connecticut. Our audit covered the period of October 1, 2001, through September 30, 2004, but
was expanded to include other periods when necessary. We performed our review in accordance
with generally accepted government auditing standards.



                                                21
                              INTERNAL CONTROLS

Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following objectives are being achieved:
   •   Effectiveness and efficiency of operations,
   •   Reliability of financial reporting, and
   •   Compliance with applicable laws and regulations.

Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. Internal controls include the processes and procedures for
planning, organizing, directing, and controlling program operations. They include the systems
for measuring, reporting, and monitoring program performance.


 Relevant Internal Controls
              We determined the following internal controls were relevant to our audit objectives:
              •       Controls over tenant eligibility;
              •       Controls over calculating housing assistance payments, tenant payments, and
                      utility allowances;
              •       Controls over rent reasonableness;
              •       Controls over voucher use;
              •       Controls over housing quality standards inspections;
              •       Controls over expenditures to ensure they were necessary and reasonable;
              •       Controls over the effective and efficient acquisition, renovation, and use of
                      facilities;
              •       Controls over Section 8 program accounting and reporting;
              •       Controls over the management of the Pembroke Green development; and
              •       Controls over writing off uncollectible portable voucher accounts.

              We assessed the relevant controls identified above.

              A significant weakness exists if management controls do not provide reasonable
              assurance that the process for planning, organizing, directing, and controlling
              program operations will meet the organization’s objectives.




                                                 22
Significant Weaknesses
           Based on our review, we believe the following items are significant weaknesses

           •   The Authority lacked controls over the effective and efficient acquisition,
               renovation, and use of facilities (see finding 1).
           •   There were inadequate procedures established for the Pembroke Green
               development to ensure that the 21 duplexes (42 units) were purchased and
               rented to eligible families (see finding 2).
           •   There were inadequate controls over the accounting and reporting of the
               Voucher program’s administrative fee reserve account (see finding 3).
           •   Allocation procedures were not adequate to ensure that expenses were charged
               to the appropriate program (see Finding_4).
           •   An effective quality control system was not established to ensure that housing
               assistance payments were properly calculated and supported (see Finding 5).
           •   The Authority did not have policies in effect to write off uncollectible
               accounts receivable (see finding 6).




                                            23
                                    APPENDIXES

Appendix A

               SCHEDULE OF QUESTIONED COSTS
              AND FUNDS TO BE PUT TO BETTER USE

 Recommendation           Ineligible 1/    Unsupported      Unreasonable or      Funds to be put
        number                                      2/       unnecessary 3/       to better use 4/
      1B                                                                           1,465,688
      2B                 183,510
      2C                                   $1,101,060
      3A                 636,811
      4B                $406,683
      4C                                                         2,628


1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
     that the auditor believes are not allowable by law; contract; or federal, state, or local
     policies or regulations.

2/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of audit. Unsupported costs
     require a decision by HUD program officials. This decision, in addition to obtaining
     supporting documentation, might involve a legal interpretation or clarification of
     departmental policies and procedures.

3/   Unreasonable/unnecessary costs are those costs not generally recognized as ordinary,
     prudent, relevant, and/or necessary within established practices. Unreasonable costs
     exceed the costs that would be incurred by a prudent person in conducting a competitive
     business.

4/   “Funds to be put to better use” are quantifiable savings that are anticipated to occur if an
     OIG recommendation is implemented, resulting in reduced expenditures at a later time
     for the activities in question. This includes costs not incurred, deobligation of funds,
     withdrawal of interest, reductions in outlays, avoidance of unnecessary expenditures,
     loans and guarantees not made, and other savings.




                                              24
 Appendix B

            AUDITEE COMMENTS AND OIG’s EVALUATION


 Ref to OIG Evaluation      Auditee Comments




Comment 1




                             25
 Appendix B

            AUDITEE COMMENTS AND OIG’s EVALUATION


 Ref to OIG Evaluation      Auditee Comments




Comment 2




Comment 3




                             26
 Appendix B

            AUDITEE COMMENTS AND OIG’s EVALUATION


 Ref to OIG Evaluation      Auditee Comments




Comment 4




                             27
 Appendix B

            AUDITEE COMMENTS AND OIG’s EVALUATION


 Ref to OIG Evaluation      Auditee Comments




Comment 4




Comment 5




                             28
 Appendix B

            AUDITEE COMMENTS AND OIG’s EVALUATION


 Ref to OIG Evaluation      Auditee Comments




Comment 6




Comment 7




                             29
 Appendix B

            AUDITEE COMMENTS AND OIG’s EVALUATION


 Ref to OIG Evaluation      Auditee Comments




Comment 8




                             30
Appendix B

        AUDITEE COMMENTS AND OIG’s EVALUATION


Ref to OIG Evaluation   Auditee Comments




                         31
 Appendix B

            AUDITEE COMMENTS AND OIG’s EVALUATION

                              OIG Evaluation of Auditee Comments

 Ref to Auditee
 Response               OIG Evaluation

Comment 1         The Authority disagreed that they mismanaged the $1.5 Million purchase and
                  renovation of 215 Warren Street property because it was permissible at the
                  time of purchase and they were unaware of pending changes for the Section 8
                  program. We concur that the use of Section 8 funds to purchase 215 Warren
                  Street was permissible. Although the Authority did not directly respond to our
                  recommendations 1A and 1B we believe the Authority’s response supports our
                  assessment that the project was mismanaged.

Comment 2         The Authority’s comments 1.A., 1. B., and 1.C., did not address
                  recommendations 1A and 1B, but the proposed actions mentioned in the
                  Authority's comments and should satisfy recommendation 1A. However, the
                  proposed actions will not adequately address recommendation 1B. This is
                  because Voucher funds may not be used for the entire facility purchase
                  because the Authority's Administrative Fee Reserves were reduced to zero
                  during fiscal year 2004, and the Authority's use of Voucher program
                  Administrative fees for other housing purposes was prohibited under 24 CFR
                  982.152. HUD should ensure that the Authority’s corrective actions
                  adequately implements recommendation 1B, including possibly selling the
                  property. Further, if the plan justifies keeping the facility, HUD should ensure
                  that the corrective action plan does not utilize Voucher funds for the facility’s
                  entire purchase, renovation, and maintenance costs.

                  The Authority’s proposed actions are responsive to our recommendations 2A,
Comment 3         B, and C. However, HUD program Officials should ensure that the proposed
                  corrective action plan is sufficiently detailed and require the repayment of
                  funds, if necessary.

                  The Authority did not agree that $636,811 in low-income public housing funds
Comment 4         was improperly used. However, the Authority stated that $608,571 in low-
                  income public housing funds was used to pay Section 8 operating expenses
                  (Response 3C).

                  The Authority also did not agree that $1,465,003 in administrative fee reserve
                  expenses during fiscal years 2002, 2003, and 2004 was improperly accounted
                  for (Response 3A). However, the Authority resubmitted their FY 2004 REAC
                  Statement and HUD Financial Statement We believe these corrections are a




                                                 32
 Appendix B

            AUDITEE COMMENTS AND OIG’s EVALUATION

 Ref to Auditee
 Response              OIG Evaluation

Comment 4         (cont’d) We encourage the Authority to seek all necessary advice regarding the
                  implementation of proper accounting procedures. We do not believe that the
                  Authority's response regarding the differences between GAAP and REAC
                  accounting requirements was the proximate cause of the Authority's failure to
                  submit accurate REAC and HUD Financial statements.

                  The response also addresses recommendation 3D and consider it implemented.
                  The final action for Recommendation 3D is complete and will be recorded in
                  the departmental audit resolution tracking system concurrent with report
                  issuance.

                  The Authority did not address our recommendation 3B to revise and
Comment 5         strengthen internal controls to ensure low-income public housing program
                  funds are only used to pay for low-income public housing program expenses.
                  Therefore, this recommendation remains open and HUD should ensure the
                  Authority develops and implements adequate procedures.

                  Recommendation 3A will be satisfied if the Authority fully repays the LIPH,
Comment 6         and the difference between $636,811 and $608,571 may be attributed to year
                  closing and adjusting entries, which should be verified as part of completing
                  the corrective action.

                  We consider the Authority's proposed actions to revise administrative controls
                  by October 31, 2005 responsive to our recommendation 3C. However, the
                  HUD should ensure that the procedures, when implemented, ensure that the
                  Authority properly accounts for and reports its administrative reserve funds.

Comment 7         The Authority agreed with the finding and recommendations, but did not
                  adequately address our recommendation 4A regarding properly allocating
                  expenses to the Voucher program. HUD should ensure that the Authority
                  establishes and implements adequate procedures to allocate costs to the
                  benefiting programs and ensure that only necessary costs are charged to the
                  program. The action indicated in the response for recommendations 4B and
                  4C resolve these recommendation and final action complete will be recorded
                  in the departmental audit resolution tracking system concurrent with report
                  issuance.


                                                33
 Appendix B

            AUDITEE COMMENTS AND OIG’s EVALUATION

 Ref to Auditee
 Response              OIG Evaluation

                  We consider the Authority's proposed corrective actions to be partially
Comment 8         responsive to our recommendation 6A. We believe the Authority's proposed
                  five year write off of the $114,081 uncollectible and invalid payables is not
                  adequate to ensure their books and records are adjusted in a timely manner.
                  The Authority has had as much as 10 years to collect these receivables, pay the
                  payables, or write them off. If implemented as planned the Authority’s books
                  and records will continue to be misstated. Therefore, the entire amount should
                  be written off.

                  The Authority also did not adequately address our recommendation 6B to
                  "Determine whether the amounts owed other entities are valid and pay the
                  amount owed."




                                                34
Appendix C
 SCHEDULE OF PEMBROKE GREEN TENANT ELIGIBILITY


                               Did purchaser meet income    Did tenant meet income
          Address               eligibility requirements?   eligibility requirements?
127-131 Hallett Street                      No                      Unknown
68-72 Martin Luther King Dr.                No                      Unknown
696-700 Pembroke Street                     No                          Yes
163-167 Hallett Street                  Unknown                     Unknown
163-167 Hamilton Street                 Unknown                         Yes
191-195 Hamilton Street                 Unknown                         Yes
650-656 Pembroke Street                 Unknown                     Unknown
93-97 Hallett Street                    Unknown                     Unknown
688-692 Pembroke Street                     Yes                     Unknown
107-111 Hallett Street                      Yes                     Unknown
117-121 Hallett Street                      Yes                     Unknown
145-149 Hallett Street                      Yes                     Unknown
205-209 Hamilton Street                     Yes                     Unknown
30-34 Martin Luther King Dr.                Yes                     Unknown
42-46 Martin Luther King Dr.                Yes                     Unknown
82-86 Martin Luther King Dr.                Yes                     Unknown
177-181 Hamilton Street                     Yes                         Yes
217-221 Hamilton Street                     Yes                         Yes
56-60 Martin Luther King Dr.                Yes                         Yes
668-674 Pembroke Street                     Yes                         Yes
716-720 Pembroke Street                     Yes                         Yes




                                            35
          Appendix D
                 SCHEDULE OF INELIGIBLE SALARY/BENEFITS COSTS


                                                                                                                             Improper charges
                                             Authority’s                                                  Audited     salary + federal income tax + medical
                                                                                                                      employees retirement fund + workers
                                    Annual   allocation                                                  allocation        compensation ins. + state
Fiscal year      Position title     salary      rate                 Reason questioned                       rate      unemployment ins.+ hospitalization

               Human resource                              21.3 of 141 employees work for
  2002             director         52,235     65%         Section 8. Thus, allocation s/b 15%             15%                     $39,249
               Human resource                              21.3 of 141 employees work for
  2002            assistant         28,980      0%         Section 8. Thus, allocation s/b 15%             15%                      (6,593)
                                                           21.3 of 141 employees work for
  2002           Payroll clerk      49,727     75%         Section 8. Thus, allocation s/b 15%             15%                      44,854
               Benefits & payroll                          21.3 of 141 employees work for
  2002           administrator      56,904      0%         Section 8. Thus, allocation s/b 15%             15%                     (12,946)
                                                           No support for time charged. Deputy
                                                           director and chief financial officer stated
  2002        Computer specialist   45,561     50%         that 15% was appropriate.                       15%                      24,015
                 Maintenance
  2002             director         55,838     10%         No Section 8 duties                              0%                       8,409
                  Preventive
                 maintenance
  2002           coordinator        39,850     10%         No Section 8 duties                              0%                       6,001
 Subtotal                                                                                                                                       $ 102,990
               Human resource                              21.65 of 141 employees work for
  2003            director          54,324     65%         Section 8. Thus, allocation s/b 15%             15%                     $40,616
               Human resource                              21.65 of 141 employees work for
  2003            assistant         30,139      0%         Section 8. Thus, allocation s/b 15%             15%                      (6,969)
                                                           No support for time charged. Deputy
                                                           director and chief financial officer stated
  2003        Computer specialist   45,781     50%         that 15% was appropriate.                       15%                      24,131
                                                           21.65 of 141 employees work for
  2003           Payroll clerk      49,967     60%         Section 8. Thus, allocation s/b 15%             15%                      33,596
               Benefits & payroll                          21.65 of 141 employees work for
  2003           administrator      59,180     30%         Section 8. Thus, allocation 15%                 15%                     (13,685)
                 Maintenance
  2003             director         58,352     10%         No Section 8 duties                              0%                       8,788
                  Preventive
                 maintenance
  2003           coordinator        41,444     10%         No Section 8 duties                              0%                       6,241
 Subtotal                                                                                                                                        $ 92,718
               Human resource                              25.75 of 141 employees work for
  2004            director          55,954     65%         Section 8. Thus, allocation s/b 15%.            18%                      39,881
               Human resource                              25.75 of 141 employees work for
  2004            assistant         31,043      0%         Section 8. Thus, allocation s/b 15%.            18%                      (8,646)
                                                           No support for time charged. Deputy
                                                           director and chief financial officer stated
  2004        Computer specialist   45,341     50%         that 15% was appropriate.                       15%                      24,201
                                                           25.75 of 141 employees work for
  2004           Payroll clerk      49,486     60%         Section 8. Thus, allocation s/b 15%.            18%                      31,498
                 Maintenance
  2004             director         60,681     10%         No Section 8 duties                              0%                       9,254
               Preventive maint.
  2004            coordinator       42,687     10%         No Section 8 duties                              0%                       6,510
                                                           Section 8 has little or no inventory.
                                                           Deputy director stated that 10% was
  2004        Inventory analysis    47,276     50%         appropriate.                                    10%                      28,838
 Subtotal                                                                                                                                       $ 131,536
  Total                                                                                                                                         $ 327,244



                                                                         36
 Appendix E

         SCHEDULE OF INELIGIBLE ADMINISTRATIVE COSTS


                                                                                                         Audited
                                                        Authority’s                           Audited
                                                                                                        allocation Overcharged
Fiscal                    Annual        Services         allocation                          allocation (amount X     (authority $ -
 year       Payee        payments       received            rate      Reason questioned         rate    audited rate)   audited $)
                                                                    We applied Authority’s
      Automated Data                                                fiscal year 2004 rate of
  2002 Processing          $ 39,124 Payroll services        50%     16% as reasonable           16%         $ 6,260         $ 13,302
                                                                    We applied Authority’s
      Automated Data                                                fiscal year 2004 rate of
  2003 Processing           56,341 Payroll services         35%     16% as reasonable           16%           9,015           10,705
                                   Telephone
       Public Housing              answering service
  2002 Residents            29,921 for public housing      50%       No Section 8 benefit      0%                0           14,961
                                   Telephone
       Public Housing              answering service
  2003 Residents            25,280 for public housing      35%       No Section 8 benefit      0%                0            8,848
                                   Credit reports
                                   for public housing
  2002 The Info Center      13,410 tenants                 50%       No Section 8 benefit      0%                0            6,705
                                   Credit reports
                                   for public housing
  2003 The Info Center      12,626 tenants                 35%       No Section 8 benefit      0%                0            4,419
                                   Investment
       UBS Investment              fees for public
  2003 Services             19,952 housing                 35%       No Section 8 benefit      0%                0            6,983
                                   Credit card
                                    processing fees
  2002 Fleet Bank            3,663 for public housing      50%       No Section 8 benefit      0%                0            1,831
                                   Credit card
                                    processing fees
  2003 Fleet Bank            4,371 for public housing      35%       No Section 8 benefit      0%                0            1,530

         Total                                                                                                           $ 69,284




                                                              37
Appendix F

  SCHEDULE OF INELIGIBLE PUBLIC RELATIONS COSTS




                                                                                     Ineligible
                                                                                     expenses
                            Authority’s                                    Audited charged to the
       Check    Amount      allocation                         Reason     allocation Section 8
         #     allocated        rate       Description       questioned       rate    program
                                          Resident         No Section 8
       49340      $ 4,500      50%        newsletter       benefit          0%              $ 2,250
                                          Scattered site   No Section 8
       50518        2,100      50%        photography      benefit          0%                1,050
                                          Resident         No Section 8
       51530        3,750      50%        newsletter       benefit          0%                1,875
                                          Resident         No Section 8
       53564        4,000      50%        newsletter       benefit          0%                2,000
                                          Resident         No Section 8
       60718        4,000      16%        newsletter       benefit          0%                 640
                                          Resident         No Section 8
       62435        4,000      16%        newsletter       benefit          0%                 640
                                          Resident         No Section 8
       64617        2,125      16%        newsletter       benefit          0%                 340
                                          Resident         No Section 8
       65121        2,125      16%        newsletter       benefit          0%                 340
                                          Resident         No Section 8
       65289        2,125      16%        newsletter       benefit          0%                 340
                                          Resident         No Section 8
       66043        2,125      16%        newsletter       benefit          0%                 340
                                          Resident         No Section 8
       66213        2,125      16%        newsletter       benefit          0%                 340

       Total                                                                            $    10,155




                                                      38
Appendix G

                       SCHEDULE OF TENANT FILE ERRORS
      Subsidy      Exceptions       Effect on housing assistance payment, family rent, or utility
                                    reimbursement
1     V00003       1                 No effect.
2     V01619       1 and 2           Utility reimbursement reduced from $122/month to $6/month.
3     V01099       1, 3, 4, 5, 6,    Housing assistance payment reduced from $740/month to $612/month;
                   and 7             family rent increased from $60/month to $188/month.
4     V02511       1 and 4           Unable to determine effect.
5     V00194       1                 No effect.
6     V02807       6 and 7           Housing assistance payment reduced from $533/month to $469/month;
                                     family rent increased from $367/month to $431/month.
7     V00496       1                 Unable to determine actual effect but estimate housing assistance payment
                                     would have been reduced by $265/month.
8     V00303       1                 No effect.
9     V02262       1, 6, and 7       Housing assistance payment reduced from $684/month to $660/month;
                                     family rent increased from $66/month to $90/month.
10    V03167       1                 No effect.
11    V03229       3, 6, and 7       Housing assistance payment increased from $672/month to $684/month;
                                     family rent reduced from $178/month to $166/month.
12    V00776       4, 6, and 7       Housing assistance payment reduced from $385/month to $366/month;
                                     family rent increased from $540/month to $559/month.
13    V01517       6 and 7           Housing assistance payment reduced from $418/month to $399/month;
                                     family rent increased from $482/month to $501/month.
14    V01540       2 and 3           Utility reimbursement increased from $53/month to $71/month.
15    V03266       8                 No effect.
16    V01368       4                 Unable to determine effect.
17    V00153       6 and 7           Housing assistance payment reduced from $519/month to $485/month;
                                     family rent increased from $281/month to $315/month.
18    V00845       3, 6, and 7       Housing assistance payment reduced from $409/month to $397/month;
                                     family rent increased from $291/month to $303/month.

Description of Exceptions:

     1.   Missing at least one third party verification.
     2.   Utility reimbursement incorrectly calculated.
     3.   Improper utility allowance used.
     4.   No support for utility payments.
     5.   Improper payment standard used.
     6.   Housing assistance payment incorrectly calculated.
     7.   Family share of rent incorrectly calculated.
     8.   Improper dependent deduction allowed.




                                                     39