Issue Date
April 24, 2006
Audit Report Number
2006-KC-1009
TO: Debra L. Lingwall, Coordinator, Public Housing Program Center, 7DPHO
//signed//
FROM: Ronald J. Hosking, Regional Inspector General for Audit, 7AGA
SUBJECT: The Omaha Housing Authority Did Not Encumber Resources without
HUD Approval
HIGHLIGHTS
What We Audited and Why
We audited the Omaha Housing Authority (Authority) and its nonprofit affiliates
in Omaha, Nebraska, due to our risk assessment of the larger housing authorities
in Region VII and in response to several citizen complaints.
Our objective was to determine whether the Authority encumbered resources to
benefit other entities’ financing and/or development activities in violation of its
annual contributions contract, other agreement, or regulation.
This is the second report resulting from our audit of the Authority.
What We Found
Based on our testing of various partnership agreements, guaranty/development
agreements, and loans, the Authority did not encumber resources without U.S.
Department of Housing and Urban Development (HUD) approval.
This report contains no findings. No further action on your part is necessary.
Auditee’s Response
We provided the draft audit report to the Authority on April 12, 2006. The
auditee elected not to provide comments on the report.
2
TABLE OF CONTENTS
Background and Objectives 4
Results of Audit 5
Scope and Methodology 6
Internal Controls 7
Appendixes
A. Background on Hawkins Lawsuit 8
3
BACKGROUND AND OBJECTIVES
The Omaha Housing Authority (Authority) began operations in 1935. A five-member board of
commissioners governs the Authority while an executive director manages its day-to-day
operations. The Authority’s administrative office is located at 540 South 27th Street, Omaha,
Nebraska. Its public housing/Section 8 Housing Choice Voucher program office is located at
3003 Emmett Street, Omaha, Nebraska.
The Authority has two nonprofit affiliates, Housing in Omaha and the Omaha Housing
Foundation. Housing in Omaha’s mission is to provide affordable, decent, and safe housing for
persons of low income. It serves as a developer and co-owner of mixed-finance developments
for the Authority. The Omaha Housing Authority Foundation provides financial assistance and
educational incentives to public housing residents. In addition, it supports youth athletic teams,
youth recreational activities, and family events.
Our objective was to determine whether the Authority encumbered resources to benefit other
entities’ financing and/or development activities in violation of its annual contributions contract,
other agreement, or regulation.
4
RESULTS OF AUDIT
The Omaha Housing Authority operates two non-profit entities: the Omaha Housing Authority
Foundation and Housing in Omaha.
The Omaha Housing Authority Foundation’s primary funding sources are community donations
and voluntary contributions from the Authority’s staff.
Housing in Omaha is a development partner in numerous mixed-finance projects and serves as a
general partner, managing member, and/or manager. The U.S. Department of Housing and
Urban Development (HUD) approved Housing In Omaha’s role in the mixed-finance projects.
Based on our testing of various partnership agreements, guaranty/development agreements, and
loans, the Authority did not encumber any resources for the benefit of these entities without
HUD approval.
5
SCOPE AND METHODOLOGY
To accomplish our audit objectives, we reviewed the Authority’s and its nonprofit affiliates’
financial statements/general ledger data, correspondence between HUD and the Authority, loan
documents, incorporation/partnership documents, board minutes, tax credit application packages,
prior HUD reviews, cost allocation and court documents, as well as various guaranty and
development agreements. We researched applicable regulatory guidance and interviewed HUD
and Authority staff.
Our review period was January 1, 2003, through December 31, 2005. We conducted our audit
work from January through March 2006 at the Authority’s central administrative office in
Omaha, Nebraska.
We performed our review in accordance with generally accepted government auditing standards.
6
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:
• Ensuring compliance with laws and regulations and
• Safeguarding resources.
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.
7
APPENDIXES
Appendix A
BACKGROUND ON HAWKINS LAWSUIT
In February 1990, four Authority residents filed suit in the United States District Court for the
District of Nebraska against the Authority, the City of Omaha, and HUD (Hawkins lawsuit). The
plaintiffs alleged the Authority, the City of Omaha, and HUD discriminated against minority
residents in locating public housing and HUD-assisted housing. On January 21, 1994, the court
approved a final settlement agreement. The court retained jurisdiction for seven years from the
settlement agreement date to permit the parties to request judicial intervention for enforcement of
the settlement agreement.
In March 2000, the plaintiff’s counsel, HUD, the Authority, and the City of Omaha signed a joint
motion to amend the settlement agreement to extend the deadline for completion of the
development of replacement housing units and jurisdiction of the court for four additional years
(October 2005). The Authority approved a revised Hawkins replacement housing plan and sent
it to the plaintiff. After reviewing the revised Hawkins plan, the plaintiffs filed a motion to
dismiss the case. On November 17, 2005, the court determined the terms of the settlement
agreement, and the obligations of the defendants were satisfied.
In March 2002, HUD approved the Authority’s request to dispose of one building, consisting of
121 units and 1.67 acres of land at Burt Towers. HUD approved the use of the proceeds
generated from this disposition for the development of replacement housing via acquisition or
development.
The Authority submitted a request to HUD for approval of the Burt Towers purchase agreement
between the Authority and Creighton University. On July 22, 2002, HUD approved the sale of
Burt Towers to Creighton University in the amount of $1,825,000. The proceeds funded various
development projects.
In 2005, HUD approved various mixed-finance proposals and amendments to the consolidated
annual contributions contract. These proposals helped satisfy requirements set forth in the
Hawkins settlement agreement.
8
The following table lists the development projects we reviewed, the total number of units
requiring construction, and the total number of units counted toward satisfying the public
housing mandated in the Hawkins settlement.
Development projects Total number of units Total number of Hawkins
requiring construction units
Chambers Court 70 32
Crown Creek 38 37
North Omaha 24 24
Omaha Crown I 16 16
Omaha Crown II 12 12
Securities Building 35 35
Apartments
Farnam Street Building 30 30
Apartments
Bayview Apartments 12 12
Long School 7 7
Totals 244 205
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The Omaha Housing Authority Did Not Encumber Resources without HUD Approval
Published by the Department of Housing and Urban Development, Office of Inspector General on 2006-04-24.
Below is a raw (and likely hideous) rendition of the original report. (PDF)