oversight

Travis County Housing Authority, Austin, Texas, Lacks Capacity to Administer American Recovery and Reinvestment Act of 2009 Public Housing Capital Funds

Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-08-17.

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

                                                  U.S. Department of Housing and Urban Development
                                                  Office of Inspector General, Region VI
                                                  819 Taylor Street, Suite 13A09
                                                  Fort Worth, Texas 76102

                                                  (817) 978-9309 FAX (817) 978-9316
                                                   http://www.hud.gov/offices/oig/
                                                  OIG Fraud Hotline 1-800-347-3735

                                                  MEMORANDUM NO:
August 17, 2009                                   2009-FW-1801

MEMORANDUM FOR: David Pohler, Director, Office of Public Housing, 6JPH

              //signed//
FROM:         Gerald R. Kirkland
              Regional Inspector General for Audit, 6AGA

SUBJECT:      Travis County Housing Authority, Austin, Texas, Lacks Capacity to Administer
              American Recovery and Reinvestment Act of 2009 Public Housing Capital Funds



                                     INTRODUCTION

We performed an American Recovery and Reinvestment Act of 2009 (ARRA) capacity review
of the Travis County Housing Authority (Authority) because of financial control weaknesses
identified during an ongoing U. S. Department of Housing and Urban Development (HUD)
Office of Inspector General (OIG) audit. The review objective was to determine whether the
Authority has the capacity to properly account for ARRA funding and the controls to ensure
those funds are expended only for eligible program activities. This memorandum provides the
review results.

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 review


                             METHODOLOGY AND SCOPE

The review was based on information obtained and reviewed and conclusions made about the
Authority's financial controls during an ongoing HUD OIG audit. The audit included a review of
the Authority’s financial controls and records for fiscal years 2006 through 2008 with some
additional review of prior periods as necessary to accomplish the audit objective. For this
review, we also obtained an understanding of ARRA legislation and program guidance, reviewed
the Authority's ARRA grant, and contacted Authority and HUD public housing program staff.
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                                        BACKGROUND

The Authority is governed by a five-member board of commissioners appointed by the county
commissioners. It is an independent, government-funded agency charged with the responsibility
of providing low-income housing to help meet the housing needs of the residents of Travis
County, Texas. The Authority receives various HUD grants and administers 105 low-rent public
housing units and 564 Housing Choice Voucher program units.

HUD expressed concern over the Authority’s financial status when it rejected the Authority’s
fiscal year 2005 and 2006 audited financial statements. HUD also froze grant draw downs in
2007 for the Authority’s Shelter Plus Care grants. Shortly after OIG’s on-going audit started,
HUD formally designated the Authority as “Troubled” after reviewing its fiscal year 2007
audited financial statements.

On February 17, 2009, Congress enacted ARRA, which provided funding to carry out capital and
management activities at public housing developments. ARRA requires a high degree of
transparency and accountability. Additionally, ARRA recipients are required to provide timely
and reliable program data and demonstrate the capacity to administer ARRA funding.

On March 18, 2009, HUD authorized $182,074 in ARRA funding for the Authority to carry out
capital and management activities at public housing developments. The Authority indicated it
will use the funding to repair and/or replace air conditioning units, roofing, and fencing at its
low-rent program properties.


                                   RESULTS OF REVIEW

The Authority lacks capacity to administer ARRA funding in accordance with program
requirements. Our ongoing audit found that the Authority disregarded federal requirements by
transferring program assets between federal and nonfederal funds without proper support or
justification and did not maintain auditable financial records. This condition occurred because
the Authority disregarded HUD requirements in order to keep its programs running and lacked
financial controls. Consequently, HUD cannot be assured the Authority will accurately account
for its use of ARRA funding or use ARRA funding for only eligible program activities. Thus,
we recommend that HUD increase oversight over the grant and either rescind ARRA funding or
place the funding on a cost reimbursement basis.

The Authority Transferred Funds without Support and Justification
The Authority violated federal requirements when it haphazardly transferred program assets
between federal and nonfederal programs to fund program operations. The Authority transferred
assets between programs using electronic funds transfers between bank accounts and by
inappropriately using funds from one program to pay the expenses of one or more other
programs. During its fiscal year ending June 30, 2007, the Authority transferred more than $2.5
million between its federal and nonfederal programs.
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The audit included a statistical sample of 166 interfund transactions. The sample was taken from
a total of 302 interfund transactions that the Authority posted to its general ledger, increasing
HUD program liabilities. The Authority provided documentation for only four of the sampled
items. The documentation supported two sample items representing electronic funds transfers
into the low-rent program bank account. The documentation did not support the remaining two
items, and the Authority could not provide support for its allocation of costs between federal and
nonfederal programs or competitive pricing support for contracted grounds maintenance costs.

The Authority Did Not Maintain Auditable Financial Records
The Authority did not provide timely support for the sample of interfund transactions.
Additionally, it did not completely and accurately record interfund transactions and used
incompatible electronic accounting systems requiring additional manual entries for accounts
payable transactions. Additionally, the Authority did not have controls to ensure its interfund
transactions and accounts payable transactions were completely and accurately recorded. The
lack of controls affected both HUD and non-HUD interfund payables and receivables, expenses,
and disbursements. Because of the Authority’s poor accounting practices, such as haphazardly
transferring funds between its program accounts; its inability to provide timely support for the
transfers; and its lack of controls to ensure its transactions were completely and accurately
recorded, it cannot meet ARRA accountability, transparency, and reporting requirements.
Further, it cannot accurately prepare financial reports in accordance with HUD requirements.

                                        AUDITEE RESPONSE

On July 1, 2009, we provided a draft of this memorandum and the related audit report1 to the
Authority with written comments due by July 20, 2009. We extended the response date to
July 27, 2009. The Authority did not provide comments for this memorandum, but both the
Authority and the chairman of the board of commissioners provided comments to the report,
which are included in appendix B of the report


                                       RECOMMENDATIONS

We recommend that the Director of the San Antonio Office of Public Housing

1A. Increase monitoring and oversight of the Authority’s financial and program activities and

1B. Either recover ARRA funding from the Authority or place the Authority’s ARRA funding
    on a cost reimbursement basis.




1
    The Housing Authority of Travis County, Austin, Texas, Could Not Adequately Account For or Support Its Use
    of Federal Program Funds, 2009-FW-1015, issued August 17, 2009.