oversight

The Housing Authority of St. Louis County, MO Has Not Used Restricted Assets To Inappropriately Benefit Other Entities' Development Activities

Published by the Department of Housing and Urban Development, Office of Inspector General on 2004-11-15.

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

                                                                              Issue Date
                                                                                     November 15, 2004
                                                                               Audit Report Number
                                                                                     2005-KC-1002




         TO:         Andrew Boeddeker, Director, Office of Public Housing,
                       Kansas City HUB, 7APH

                     /signed/
         FROM:        Ronald J. Hosking, Regional Inspector General for Audit, 7AGA

         SUBJECT: The Housing Authority of St. Louis County, MO, Has Not Used Restricted
                  Assets To Inappropriately Benefit Other Entities’ Development Activities


                                              HIGHLIGHTS

          What We Audited and Why

                      During the last few years, the Office of Inspector General has determined that
                      many public housing authorities inappropriately encumbered assets to support
                      Housing Development Corporation activities without U.S. Department of Housing
                      and Urban Development (HUD) approval. Our analysis of risk factors identified
                      the Housing Authority of St. Louis County (Authority) as a housing authority
                      with indicators of potential unauthorized development activity.

                      Our objective was to determine whether the Authority encumbered resources
                      subject to an Annual Contributions Contract or other agreement or regulation to
                      the benefit of other entities’ financing or development activities without specific
                      HUD approval.

          What We Found


                      While the Authority has entered into many and varied agreements such as
                      guaranties, lines of credit and loans to the benefit of other entities and activities, it
                      has provided assurances that they have avoided encumbering ACC assets during
                      the development of housing units for projects reviewed. This report contains no
                      findings. No further action on your part is necessary.


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          Auditee’s Response


                     We discussed the results of our review with Authority management on October
                     14, 2004. The Authority agreed with the content of the report and declined the
                     opportunity to provide written comments. The Authority also declined an exit
                     conference.




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                        TABLE OF CONTENTS

Background and Objectives                   4

Scope and Methodology                       5

Internal Controls                           6




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                               BACKGROUND AND OBJECTIVES


         In October of 1952, the St. Louis County Council created the Housing Authority of St. Louis
         County (Authority). Under Missouri law, the Authority is a municipal corporation empowered
         to enter into contracts, lease or rent properties, invest funds, issue revenue bonds, cooperate with
         and receive funds from the Federal Government, and exercise the power of eminent domain.
         The Authority develops, owns, manages and maintains a variety of units and provides rental
         assistance to low- and moderate-income people throughout the St. Louis County area. The
         mission of the Authority is to assist low-income families and individuals in obtaining safe,
         affordable housing and to become self-sufficient. From the early 1990’s through today, the
         Authority has been engaged in developing partnerships with the private sector and other public
         agencies for redeveloping and upgrading existing housing, using both private and public funds.

         Our objective was to determine whether the Authority encumbered resources subject to an
         Annual Contributions Contract or other agreement or regulation to the benefit of other entities’
         financing or development activities without specific HUD approval.




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                                  SCOPE AND METHODOLOGY

         To accomplish our objective, we reviewed applicable laws, regulations, and contracts. We
         interviewed HUD management and staff to obtain a general understanding of the Housing
         Authority of St. Louis County, its programs, and any known problem areas. We reviewed
         various HUD documents and data, including prior reviews. We interviewed Authority
         management and reviewed audited financial statements management letters, and various documents
         provided by the Authority. Additionally, we requested technical guidance relating to the absence of
         language specifically excluding Annual Contributions Contract assets in the Authority’s guaranties
         and whether this constituted a violation of the Annual Contributions Contract.

         Our audit period initially covered January 1, 1999, through December 31, 2003. Based on the
         results of our survey work, we reduced the audit period to January 1, 2003, to the present and
         focused on reviewing the Authority’s lines of credit, loans, and due to/due from accounting
         transactions.

         Fieldwork for this review was conducted from July through October 2004 at the Authority,
         located in St. Louis, MO. We conducted this review in accordance with generally accepted
         government auditing standards.




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                                      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 objective:

                       •   Controls to prevent Annual Contributions Contract assets from being
                           encumbered or risked without prior HUD approval.

                       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.


          Significant Weaknesses


                       We did not identify any significant weaknesses in the relevant controls identified
                       above.




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