oversight

Inglewood Housing Authority, Inglewood, California, Did Not Adequately Administer Its Section 8 Housing Choice Voucher Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2005-12-07.

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

                                                                   Issue Date
                                                                        December 7, 2005
                                                                   Audit Report Number
                                                                         2006-LA-1004




TO:         Cecilia Ross, Director, Los Angeles Office of Public Housing, 9DPH




FROM:       Joan S. Hobbs, Regional Inspector General for Audit, Region IX, 9DGA

SUBJECT: Inglewood Housing Authority, Inglewood, California, Did Not Adequately
            Administer Its Section 8 Housing Choice Voucher Program


                                    HIGHLIGHTS

 What We Audited and Why


             We audited Inglewood Housing Authority (Authority) in Inglewood, California,
             in response to a request for audit from the U.S. Department of Housing and Urban
             Development’s (HUD) Los Angeles Office of Public and Indian Housing. This is
             the fourth and final report resulting from our audit of the Authority.

             Our audit objectives were to determine whether the Authority administered its
             Section 8 Housing Choice Voucher program in compliance with pertinent HUD
             requirements and its annual contribution contract and operated its program in an
             effective and efficient manner.

 What We Found


             The Authority did not adequately administer its Section 8 Housing Choice
             Voucher program in a manner that complied with program requirements, did not
             operate its program in an efficient and effective manner, and the Authority did not
             request additional funds from HUD when needed to alleviate some of its cash
             deficit problem. The Authority did not comply with program requirements
             relating to portability procedures and responsibilities, tenant certification and
             housing quality standards requirements, housing assistance payment register
           maintenance, and salary allocation and procurement procedures. We also
           determined that the Authority was not operated in an efficient and effective
           manner because its organizational structure and management responsibilities were
           not clearly defined and its financial reporting function was ineffective and
           inefficient.

What We Recommend


           We recommend that HUD direct the City of Inglewood’s mayor and board of
           commissioners to remove and replace the current executive director and housing
           manager, establish a separate housing authority commission, and require the city
           of Inglewood to designate sufficient finance department personnel dedicated to
           work solely on Authority-related financial reporting activities. After these
           recommendations are implemented, evaluate the status of the Authority’s progress
           on its latest corrective action plan after one year under the plan.

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

Auditee’s Response


           We provided the Authority the draft report on October 26, 2005, and held an exit
           conference on November 8, 2005 and made minor changes to one
           recommendation as a result of agreements made at the exit conference. The
           Authority provided written comments on November 28, 2005. The Authority
           generally agreed with our report findings.

           The complete text of the Authority’s response, along with our evaluation of that
           response, can be found in appendix B of this report.




                                            2
                           TABLE OF CONTENTS


Background and Objectives                                                             4

Results of Audit

      Finding 1: The Authority Did Not Adequately Administer Its Section 8 Housing    6
      Choice Voucher Program

Scope and Methodology                                                                15

Internal Controls                                                                    16

Follow-up On Prior Audits                                                            18

Appendixes
   A. Schedule of Questioned Costs                                                   19
   B. Auditee Comments and OIG’s Evaluation                                          20




                                            3
                      BACKGROUND AND OBJECTIVES

The City of Inglewood, located at Inglewood City Hall, One Manchester Boulevard, Inglewood,
California, was incorporated in 1908. The city administrator is responsible for setting operational
goals, implementing legislative action and policy decisions approved by the mayor and city council,
monitoring the annual operating budget, overseeing the personnel system, and providing direction to
all city departments to ensure they meet the needs of the community. The Inglewood Housing
Authority (Authority) is a part of the community development department. The governing body is
comprised of members of the city council and the mayor. Among the duties of the governing body
are the approval of the Authority’s budget and the appointment of management. The financial
activities of the Authority are reported as a special revenue fund of the city.

The city council is the board of commissioners for the Authority; the mayor is the board
chairperson, and the city administrator is the executive director. The council meets as a board when
it makes decisions on Authority business. The housing manager conducts the day-to-day business
of the Authority, reporting through the director of community development and the deputy city
administrator for community and social services to the executive director. Below is an organization
chart showing the City of Inglewood’s structure.




                                                 4
The Authority has a baseline allocation of 1,002 Section 8 vouchers and an additional 1,167
vouchers from portable tenants. The U.S. Department of Housing and Urban Development’s
(HUD) approved budget for the Authority’s Housing Choice Voucher program is as follows:

                              Fiscal year             Amount
                                     2001             $6,634,342
                                     2002             $6,786,996
                                     2003             $6,564,723
                                     2004             $7,033,835

This audit report is the fourth and final audit report resulting from our audit of the Authority.
The other three reports we issued relate to findings that the Authority did not

   9 Follow proper salary allocation and procurement procedures for the Housing Choice
     Voucher program (report number 2005-LA-1005, issued July 11, 2005),

   9 Comply with the Housing Choice Voucher program portability procedures and
     responsibilities (report number 2005-LA-1008, issued August 26, 2005),

   9 Ensure tenant reexaminations and housing quality standards inspections were completed
     properly and in a timely manner (report number 2005-LA-1009, issued September 7,
     2005).


Our audit objectives were to determine whether the Authority administered its Section 8 Housing
Choice Voucher program in compliance with pertinent HUD requirements and its annual
contribution contract and operated its program in an effective and efficient manner.




                                                  5
                                RESULTS OF AUDIT

Finding: The Authority Did Not Adequately Administer Its Section 8
Housing Choice Voucher Program
Contrary to pertinent HUD requirements and its annual contribution contract, the Authority did
not administer its Section 8 Housing Choice Voucher program in a manner that complied with
program requirements, did not operate its program in an efficient and effective manner, and the
Authority did not request additional funds from HUD when needed. We found that the Authority
did not comply with program requirements relating to portability procedures and responsibilities,
tenant certifications and housing quality standards requirements, housing assistance payment
register maintenance, and salary allocation and procurement procedures. We also found that the
Authority was not operated in an efficient and effective manner because the organizational
structure and management responsibilities were not clearly defined and the financial reporting
function was ineffective and inefficient. Further, the Authority did not submit a written request
for additional funds from HUD that may have alleviated some of its cash deficit if HUD had
approved the additional funds. These problems occurred because the Authority’s management
lacked adequate knowledge of the Section 8 Housing Choice Voucher program; therefore, it did
not establish and implement the necessary controls and procedures and provide adequate
oversight of its operations. As a result, of the inadequate management of the Authority, it owes
nearly $4.4 million to the City of Inglewood’s general fund and is currently under its second
corrective action plan with HUD to improve its performance.



 The Authority Did Not Comply
 with Applicable Laws and
 Regulations


              The Authority did not comply with sections 5(b), 11(a), and 14(a) of its annual
              contributions contract and applicable Code of Federal Regulations and Housing
              Choice Voucher program requirements. The Authority did not comply with
              program requirements relating to portability procedures and responsibilities,
              tenant certification and housing quality standards requirements, housing
              assistance payment register maintenance, and salary allocation and procurement
              procedures. The deficiencies stated in the following paragraphs were previously
              reported in issued audit reports.

              The Authority Did Not Comply with Portability Procedures and
              Responsibilities

              Contrary to section 5(b) of its annual contributions contract and Housing Choice
              Voucher program requirements, the Authority did not comply with portability

                                               6
procedures and responsibilities. We reviewed the 143 portable tenants for whom
the initial public housing agency, Housing Authority of the City of Los Angeles,
refused to pay the housing assistance payment because the Authority did not
submit the initial bill to the Housing Authority of the City of Los Angeles within
the required six-month timeframe. We also found that the Authority did not
submit the family portability information form within 10 days to ensure duplicate
payments were not made on behalf of tenants. These errors occurred because the
Authority did not establish or implement procedures to ensure compliance with
the pertinent HUD requirements. As a result, the Authority had to unnecessarily
absorb the 143 portable tenants and incurred excess costs of $1,991,283 in
housing assistance payments that exceeded the maximum allowed for fiscal year
2004. Ultimately, these families are at risk of losing their housing.

The Authority Did Not Always Ensure Tenants Were Eligible for Assistance

Contrary to section 11(a) of the annual contributions contract and applicable Code
of Federal Regulations requirements, the Authority did not always ensure that
tenants were eligible for assistance. We reviewed 72 tenant files and found 43
were missing a total of 96 required documents. Also, 15 tenant reexaminations
were completed between 4 and 184 days late. The tenant files were incomplete
because the Authority did not develop and implement procedures to follow up on
missing tenant eligibility documents, use alternative certifications when
documents could not be obtained, and document followup efforts for the missing
documents in the corresponding tenant files. We attribute the late reexaminations
to inadequate procedures to allow adequate time to complete annual
reexaminations according to HUD requirements. As a result, HUD lacked
assurance that tenants whose initial certifications were processed without
eligibility documents were eligible for housing assistance, resulting in $153,495
in unsupported housing assistance payments. The late tenant reexaminations
cause tenants to either overpay or underpay their rent.

The Authority’s Inspections Did Not Sufficiently Detect Housing Quality
Standards Violations and Were Not Always Completed in a Timely Manner

We inspected 35 units and found that 25 contained a total of 119 housing quality
standards violations. We also reviewed the timeliness of the Authority’s
inspections for 48 tenants and found that 26 of the inspections were not completed
by the tenants’ annual anniversary dates as required. The inadequate inspections
occurred because the Authority did not develop a quality control plan to ensure
inspections complied with HUD regulations. The late inspections occurred
because the Authority did not have an adequate system in place to ensure that all
annual inspections were appropriately scheduled and completed in a timely
manner. As a result, the Authority did not ensure that its program participants
resided in housing that was decent, safe, and sanitary; and we questioned $27,411
in housing assistance payments made for units that did not meet the minimum
standards.

                                 7
The Authority Did Not Maintain an Accurate Housing Assistance Payment
Register

Contrary to section 14(a) of its annual contributions contract, our review of the
Authority’s October 2004 housing assistance payment register identified
inaccuracies regarding problems with 20 tenants because the tenants were either
deceased, had erroneous and/or false Social Security numbers, or were no longer
program participants receiving housing assistance. The inaccuracies occurred
because the Authority did not have adequate procedures and controls to ensure
that tenants were removed from the register as needed, entries into the register
were accurate, tenants’ Social Security numbers and other information were
validated during their initial certification, and the information received on tenants
that ported from another jurisdiction was certified. As a result, the Authority
made housing assistance payments of $6,864 to at least one owner on behalf of a
deceased tenant and $107,916 for tenants who may not have been eligible.

The Authority Did Not Track Staff Time and Allocate $1.8 Million in Salary
Expenses among Its HUD Programs

Contrary to section 14(a) of its annual contributions contract, our review disclosed
that the Authority did not track its employees’ time by program activity or
implement an indirect cost allocation plan to allocate its administrative salary
expenses among HUD programs. This occurred because the responsible
Authority and City of Inglewood personnel lacked adequate knowledge of the
financial reporting requirements for HUD programs. As a result, the Authority
could not provide documentation to support the portion of the $1.8 million in
salary expenses the Authority reported to HUD for fiscal years 2001 through 2003
for the Housing Choice Voucher program.

The Authority Improperly Procured Software Totaling $31,279

The Authority did not comply with HUD’s procurement requirements when it
purchased two software packages totaling $31,279. This improper procurement
occurred because the Authority did not develop and implement procurement
policies and procedures that met HUD’s requirements. As a result, there was no
assurance that the software packages were cost-effective purchases and fully met
the needs of the Authority.




                                  8
The Authority’s Operations
Were Not Efficient or Effective



          In addition to the noncompliance issues discussed above, the Authority’s
          operations were neither effective nor efficient because its organizational structure
          did not clearly define areas of authority and responsibility and did not facilitate
          the flow of information.

          Organizational Structure and Management Responsibilities Were Not
          Clearly Defined

          The Authority is a part of the City of Inglewood’s community development
          department. The housing manager conducts the day-to-day operations of the
          authority, reporting to his first line supervisor the director of community
          development. The director of community development is responsible for the
          operations of the Authority as well as five other divisions in that department (see
          the organization chart in the background section of this report). The housing
          manager’s second line supervisor is the deputy city administrator who is
          responsible for managing three departments and thirteen sub-departments.
          Finally, the housing manager reports to the executive director who is also the City
          Administrator for the City of Inglewood. The director of community
          development, the deputy city administrator and the executive director have too
          many other responsibilities and duties to focus sufficient attention on the
          Authority’s operations. In addition, we noted that the executive director does not
          have any direct contact with the housing manager or the employees unless he is
          needed to sign a HUD-related document or needs to address specific issues with
          the Authority. The director of community development, deputy city
          administrator, and executive director, while ultimately responsible for the
          Authority’s operations, have not demonstrated practical experience in operating
          and/or managing a housing authority.

          In our opinion, the Authority should be run as an independent entity and the
          housing manager should report directly to the executive director. The executive
          director is ultimately responsible for the operations of the Authority and,
          therefore, should take a more direct role in the daily operations of the Authority.
          To fulfill these obligations, the role of the executive director should be delegated
          to a person who has knowledge of the Housing Choice Voucher program to
          ensure the controls are in place and provide assurance the program is run in
          accordance with HUD regulations.

          As a result, the level of management oversight and supervision has been
          inadequate, perpetuating the recurring significant noncompliance issues
          previously cited.



                                            9
                    Financial Reporting Was Ineffective and Inefficient

                    The financial recording and reporting functions for the Authority are handled by
                    the finance department for the City of Inglewood, which we determined to be
                    ineffective and inefficient in performing the financial responsibilities of the
                    Authority. As illustrated in the chart below, the Authority’s portability receivable
                    account deficit has increased significantly since fiscal year 2002. The City of
                    Inglewood’s finance department maintains and balances the Authority’s
                    portability receivable account. It is the Authority’s responsibility to collect the
                    delinquent receivables and follow up on the delinquent accounts, but the
                    Authority believes it is the city finance department’s responsibility to collect and
                    follow up on the delinquent portability receivables for the Authority. Therefore,
                    the Authority has not taken responsibility to follow up on the delinquent
                    receivables and did not develop or implement adequate procedures to request
                    collection on these receivables. As a result, in fiscal year 2004, the City of
                    Inglewood’s finance department plans to restate $1,532,000 million of the prior
                    year’s delinquent portability receivables as an allowance for doubtful accounts.
                    The Authority also has $2,990,862 in recent outstanding portability receivables,
                    of which $1,789,188 (or 60 percent) is delinquent 90 days or more. Therefore, it
                    is very doubtful these funds will be collected. The ending balance on the
                    Authority’s portability receivable account and its cash and investment account
                    were as follows:

                           Fiscal year           Portability           Cash and investment
                                              receivable ending          account ending
                                                   balance                   balance
                               2001                    $150,293                  $1,769,000
                               2002                    $957,599                  ($839,000)
                               2003                  $2,273,874                ($3,055,000)
                               2004                 $2,990,8621               ($4,375,000)2

                    In the beginning of fiscal year 2004, the City of Inglewood paid $1.2 million from
                    its general fund in housing assistance payments on the 143 portable tenants who
                    were later absorbed in the same fiscal year by the Authority. The general fund is
                    the chief operating fund for the City of Inglewood. The general fund supports
                    core municipal services such as public safety, public works, parks, and libraries.
                    Since the Authority’s financial statements are being reclassified in fiscal year
                    2004, the Authority owes the City of Inglewood’s general fund $4,375,000, which
                    includes the $1.2 million from fiscal year 2004. Therefore, the City of Inglewood
                    cannot afford to pay for the additional absorbed tenants, and the residents of the
                    City of Inglewood may have lost a number of needed services because the
                    Authority did not administer its program efficiently or effectively.



1
    This amount does not include the $1,532,000 allocated to the allowance for doubtful accounts.
2
    The negative cash balance is being reclassified as “due to the City of Inglewood’s general fund.”

                                                           10
      There were also inconsistent budget tracking reports between the Authority and
      the finance department. The budget reports used by the Authority show actual
      expenditures, income to date, and variances against the budget. However, the
      budget reports used by the Authority would be more effective in monitoring its
      budget balance if the Authority reflected the unrecognized budget balance that is
      budgeted/expected throughout the fiscal year. This would have assisted the
      Authority in recognizing the increase in actual expenses incurred in relation to the
      tenants porting in from other jurisdictions. Further, the Authority does not submit
      monthly budget reports to the board of commissioners that compare actual
      expenses to budget expenses and year-to-date costs. If the board had reviewed the
      monthly reports with this important information, it would have seen the steady
      increase in the portability receivable account, and been prompted to take
      immediate action for receipt of the funds owed from other public housing
      agencies.

      Lastly, with the exception of our audit, there has not been an independent audit of
      the Authority’s internal controls. Therefore, there could have been deficiencies or
      findings that went undetected until the current audit. Single audit reports were
      prepared annually by independent auditors; however, the independent auditor’s
      review of the Authority’s internal controls over compliance with federal programs
      for fiscal year 2003 did not disclose the excessive receivables or the fact that
      management did not provide reasonable assurances that these funds would be
      safeguarded against loss. In addition, the independent auditor’s review did not
      provide any recommendations for improvement of the Authority’s internal controls.
      The comprehensive annual financial report combined the schedules that reflected a
      negative cash balance. However, the negative cash balances should have been
      reclassified as a liability or due to the City of Inglewood’s general fund. Starting in
      fiscal year 2004, the Authority and the City of Inglewood are issuing separate
      financial statements, and the negative cash balance has been reclassified as a liability
      due to the City of Inglewood.


The Authority Did Not Request
Additional Funds from HUD


      The Federal Fiscal Year 2004 Consolidated Appropriations Act modified the
      method of calculating renewal funds for housing assistance payments and public
      housing agency administrative expenses, authorized a central fund maintained by
      HUD, and prohibited the use of fiscal year 2004 funds for overleasing.

      The central fund will only be used to fund contract amendments to support
      voucher units leased that were authorized in the public housing agency’s baseline
      but were not included in the renewal calculation. As part of the renewal
      calculation, HUD would identify additional leasing that has occurred since the
      August 2003 reporting cycle (from the latest data submission used in the renewal



                                        11
        calculation) and would provide funding for the additional leasing from the central
        fund at the time of the renewal. Public housing agencies must have requested the
        funds before December 31, 2004 by submitting a written request for funding and
        completing HUD Form 52681B, “Voucher for Payment of Annual Contributions
        and Operating Statement”, to the Section 8 Financial Management Center.

        The Authority did not submit the request for the additional funds to the Financial
        Management Center. Requesting the additional funds requires the public housing
        agency to maintain accurate current and historical records on its unit months
        leased and housing assistance payment expenses including portability expenses.
        The request for additional funds was not made because the needed information
        was not accurate or readily available to the housing manager.

        If the Authority had applied for the additional funds, there was no guarantee that
        it would have received the funds. However, considering the Authority’s dire
        financial condition, the attempt to apply for the funds would have at least shown
        that the Authority was concerned about solving its financial problems.


Management Lacked Adequate
Knowledge and Failed to
Provide Necessary Oversight


        Collectively, as illustrated by the significant problems above, the Authority did
        not administer its Section 8 Housing Choice Voucher program in a manner that
        complied with program requirements or in a manner that was effective and
        efficient. In addition, during 2004 the Authority did not submit a written request
        for additional funds that would have alleviated some of their cash deficit if HUD
        would have approved the additional funds. We attribute the problems to
        management’s lack of adequate knowledge of the Section 8 Housing Choice
        Voucher program; therefore, it did not establish and implement the necessary
        controls and procedures to administer the program and control its program
        funding. In addition, the Authority’s management failed to provide necessary
        oversight of the program operations.


The Authority Was Placed
under Two Corrective Action
Plans


        In 2002 and 2003, HUD’s Los Angeles Office of Public Housing conducted rental
        integrity monitoring and Section 8 management assessment plan reviews and
        noted deficiencies that the Authority needed to correct. The deficiencies were not



                                         12
        corrected, and the Authority was placed under a corrective action plan for the
        period September 15, 2004, through September 30, 2005.

        In April 2005, HUD’s Recovery and Prevention Center completed limited tenant
        file reviews and performed unit inspections. Some of the problems found during
        their review included the following:

               •   Budget tracking between the Authority and the finance department
                   was inconsistent;
               •   The Authority did not have a general depository agreement with its
                   depository institution for the Housing Choice Voucher program;
               •   There was a lack of policy and procedures for the allocation of
                   information and technology expenses;
               •   The independent auditor’s review of internal controls did not disclose
                   excessive receivables in the Section 8 voucher program or the
                   deficiencies with 11 of the 14 Section 8 Management Assessment
                   Program indicators;
               •   The Authority did not use proper billing forms for requesting payment
                   on the port-in tenants, and the Authority did not have current and
                   essential financial policies and procedures;
               •   The finance department does not have board of commissioners-
                   approved policies and procedures for the financial operations of the
                   Authority;
               •   Based on the 2005 Consolidated Appropriations Act the Authority
                   faces a funding decrease of approximately $9,000 per month; and
               •   The Authority does not have a plan in place to bring its Section 8
                   program in line with its funding allocation.

        The Authority did not correct the deficiencies in the previous corrective action
        plan. In addition, the current review by the Recovery and Prevention Center
        noted additional deficiencies not included in the previous corrective action plan.
        Thus, the Los Angeles Office of Public Housing submitted a new corrective
        action plan that is effective from July 1, 2005, through July 30, 2006, to the
        Authority and the City of Inglewood’s board of commissioners (city council).
        The board of commissioners and board chair approved the corrective action plan
        on August 12, 2005.


Conclusion

        Based on the foregoing, we believe that the Authority’s current administration has
        driven the Authority into a serious negative financial situation. Despite an
        opportunity to receive additional funds, and significant attempts by HUD to
        provide remedial help through monitoring and one corrective action plan, it does
        not appear that improvements are either being made or intend to be made by
        Authority management although the Authority continues to earn an administrative

                                         13
        fee. Management’s failure to adequately administer the Section 8 Housing
        Choice Voucher program is putting HUD and the City of Inglewood at significant
        financial risk, and immediate action is needed to minimize further losses.


Recommendations

        We recommend that the director of the Los Angeles Office of Public Housing

        1A.    Direct the City of Inglewood’s mayor and board of commissioners to
               remove the executive director and housing manager from their respective
               positions and replace them with more effective management.

        1B.    Require the City of Inglewood to establish a separate housing authority
               commission.

        1C.    Require the City of Inglewood to designate sufficient finance department
               personnel dedicated to work solely on Authority-related financial
               reporting activities.

        1D.    Implement recommendations 1A, 1B, and 1C and then require the
               Authority to establish and implement the necessary controls and
               procedures to effectively administer the program. Such action will ensure
               that the Authority’s administrative fee will be funds to be put to better use
               ($975,833 for fiscal year 2004).

        1E.    Evaluate the status of recommendation 1D and the status of the
               Authority’s progress on its latest corrective action plan after one year
               under the plan.




                                        14
                        SCOPE AND METHODOLOGY

We performed the audit work from September 2004 through March 2005. The audit covered
contracts, transactions, and tenant information from October 2003 through September 30, 2004. We
expanded the scope of the audit as necessary. We reviewed applicable guidance and discussed
operations with management and staff personnel at the Authority and key officials from HUD’s
Los Angeles office.

The primary methodologies included reviews of the Authority’s

  •   Procurement and billing policies, procedures, and processes.

  •   Housing quality standards and tenant eligibility policies and procedures.

  •   Policies and procedures to ensure the maintainence of an accurate housing assistance
      payment register.

  •   Organizational structure.

  •   Policies and procedures to ensure the Authority is managing the program in accordance
      with federal regulations.

  •   Policies and procedures to ensure the Authority maintains accurate books and records.

We conducted our audit in accordance with generally accepted government auditing standards and
included tests of management controls in the three previous audits of the Authority that we
considered necessary under the circumstances.




                                               15
                             INTERNAL CONTROLS

Internal controls are 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:

              •     Policies and procedures to ensure the Authority are conducting all procurement
                    transactions in accordance with federal procurement regulations.
              •     Policies and procedures to ensure the Authority performs portability billing
                    procedures in accordance with HUD regulations,
              •     Policies and procedures to ensure the Authority make a good faith effort to
                    follow up on missing documents to validate tenant eligibility.
              •     Controls over performing housing quality standards inspections.
              •     Policies and procedures to ensure the Authority is safeguarding Section 8
                    program 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.




                                               16
Significant Weaknesses


           Based on our review, we believe the following items are significant weaknesses:

           The Authority did not have management and financial systems in place to ensure
           the Housing Choice Voucher regulations are properly implemented and the
           program is running efficiently and effectively. (finding 1).




                                           17
                       FOLLOWUP ON PRIOR AUDITS


 Prior Audit Report Number and Date


We issued audit report number 2005-LA-1005 on July 11, 2005. The report contained two findings
that the Authority did not follow proper salary allocation and procurement procedures for the
Housing Choice voucher program. We have management decisions on the five recommendations
and final corrective action is due to be completed by March 31, 2006.

We issued audit report number 2005-LA-0008 on August 26, 2005. The report contained one
finding that the Authority did not comply with Housing Choice Voucher program portability
procedures and responsibilities. Final action has been completed on one recommendation. On the
other recommendation, we have reached a management decision and final corrective action is due to
be completed by February 28, 2006.

We issued audit report number 2005-LA-1009 on September 7, 2005. The report contained three
findings that the Authority did not ensure tenant reexaminations and housing quality standards
inspections were completed properly and in a timely manner. Also, the authority did not maintain
an accurate housing assistance payment register. We have reached management decisions on the
eleven recommendations and final corrective action is due to be completed by July 1, 2006.




                                               18
                                 Appendixes
Appendix A

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

                  Recommendation         Funds to be put to better use 1/
                      number
                          1A                        $975,833



1/   “Funds to be put to better use” are quantifiable savings that are anticipated to occur if an
     Office of Inspector General (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.




                                              19
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION

Ref to OIG Evaluation   Auditee Comments




Comment 1




                         20
Comment 2




Comment 3




            21
Comment 3




            22
Comment 3




Comment 4




            23
Comment 4




Comment 5




            24
Comment 6




            25
26
                      OIG Evaluation of Auditee Comments

Comment 1
            We acknowledge that $100,000 is a lot of money; however, this must be
            weighed against the effective and efficient administration of the Authority’s
            entire Section 8 program, which is at stake. We believe the responsibility of
            administering a Section 8 program is a full-time job that requires full attention
            to understanding and applying ever-changing Section 8 regulations. We
            applaud the Authority for wanting to take training to increase its knowledge of
            Section 8, and while training is helpful, the mayor and the city council cannot
            devote the time needed to monitor the Authority’s daily activities. In our
            opinion, the City of Inglewood residents would be best served if they had
            individuals on the housing commission that have prior Section 8 experience,
            understand the requirements of administering a Section 8 program and devote
            their time to the Authority activities on a routine basis. In addition, we believe
            the restructuring of the program needs to include a housing manager that is
            also knowledgeable and committed to managing the Section 8 program and
            will report directly to an executive director whose sole job is to administer the
            Authority program activities (no multifamily new construction programs).
            Implementing these changes, and establishing a separate housing commission
            is the most effective way, in our opinion, to ensure that the Authority’s
            required policies, procedures and controls are implemented, reviewed and
            updated as required. Nevertheless, if the Authority can demonstrate to HUD
            that it can ensure an effective and efficient program that complies with HUD
            requirements, through other means we would consider that alternative during
            the audit resolution process.
Comment 2
            This finding was from audit report 2005-LA-1008. We have reached
            management decisions on the subject recommendations, and thus, have no
            further comments.

            These findings were from audit report 2005-LA-1009. We have reached
Comment 3
            management decisions on the recommendations, and thus, have no further
            comments.

            These findings were from audit report 2005-LA-1005. We have reached
Comment 4
            management decisions on the recommendations, and thus, have no further
            comments.




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Comment 5   At the exit conference, Authority officials stated they would provide us with
            documentation on financial reporting information that they believed was
            misstated or incomplete in our report. However, as of the date of this report,
            we had not received any additional documentation to support their claim;
            therefore, we did not make any changes. We reviewed the portability
            receivable information provided, and revised the report to show $1,789,188 or
            60 percent of the outstanding portable receivables. We also disagree with the
            City of Inglewood’s comment that no services were lost or reduced because of
            the advances to the Authority. The money advanced from the general fund
            cash and investments account was intended to be used for city needs.
            However, since the money was instead used for housing assistance payments,
            it precluded the city from using the funds for their original intended purpose.
            Nevertheless, we have changed the sentence to read that residents of the City
            of Inglewood “may have” lost a number of needed services.

Comment 6   We disagree with the Authority’s claim that it had “no ability” to request
            additional funds from HUD. The Authority would have, and should have, had
            the ability to request the additional funds if they had accurate and current
            historical records. As we previously stated in the report, there was no
            guarantee HUD would have granted the additional funds, but given the
            Authority’s dire financial condition, applying for these funds would have
            given the appearance the Authority was concerned about solving their financial
            problems.




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