Issue Date
November 25, 2008
Audit Report Number
2009-LA-1003
TO: K.J. Brockington, Director, Los Angeles Office of Public Housing, 9DPH
FROM: Joan S. Hobbs, Regional Inspector General for Audit, Region IX, 9DGA
SUBJECT: The Area Housing Authority of the County of Ventura, California, Did Not
Comply with HUD Requirements In Its Annual Contributions Contract
HIGHLIGHTS
What We Audited and Why
We audited the Area Housing Authority of the County of Ventura’s (Authority) Payment-
in-Lieu-of-Taxes obligations for its Low Rent Public Housing program. We initiated the
audit based on concerns over the Authority’s compliance with its annual contributions
contract. Our audit objective was to determine whether the Authority fulfilled its
Payment-in-Lieu-of-Taxes obligations for its Low Rent Public Housing program and if
not, whether applicable funds were used in accordance with U.S. Department of Housing
and Urban Development (HUD) requirements.
What We Found
The Authority disregarded its Low Rent Public Housing program’s Payment-in-Lieu-of-
Taxes obligations to the County of Ventura (County), including the cities of Ojai,
Moorpark, Camarillo and Thousand Oaks (Cities), contrary to its consolidated annual
contributions contract and cooperation agreements. Without the required approval from
the County, the Cities, and HUD, the Authority’s accounting records indicated that it
stopped payment of its Payment-in-Lieu-of-Taxes obligations in 2001 and instead
allocated $637,428 in reserves between 2001 and 2007, which it maintained in an interest
bearing bank account. Additionally, although the Authority had not made an attempt to
pay this obligated amount, it continued to report this obligation as an expense in its
audited financial statements (except for 2004 and 2005). It also requested and received
additional funding from HUD to make this Payment-in-Lieu-of-Taxes obligation as part
of an additional expense incurred for calendar years 2007 and 2008 in the amount of
$195,643. Further, despite not being paid, the County and the Cities have continued to
provide public services and facilities for the Authority’s Low Rent Public Housing
program units.
What We Recommend
We recommend that HUD require the Authority to comply with HUD’s requirements
regarding the use of Payment-in-Lieu-of-Taxes funds with the County and the Cities by
settling its Payment-in-Lieu-of-Taxes obligations to the County in the amount of
$637,428 or reimburse HUD $736,315.
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 a discussion draft report on October 17, 2008, and held an
exit conference with the Authority’s officials on October 23, 2008. The Authority
provided written comments on November 13, 2008, and generally disagreed with our
findings.
The complete text of the auditee’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 Disregarded Its Payment-in-Lieu-of-Taxes Obligation 5
Scope and Methodology 8
Internal Controls 9
Appendixes
A. Schedule of Funds to Be Put to Better Use 10
B. Auditee Comments and OIG’s Evaluation 11
C. Criteria 22
3
BACKGROUND AND OBJECTIVES
The Area Housing Authority of the County of Ventura (Authority) is an independent, nonprofit
agency serving the unincorporated areas of Ventura County and the cities of Camarillo, Fillmore,
Moorpark, Ojai, Simi Valley, and Thousand Oaks. It is governed by a locally appointed board of
15 commissioners, appointed by each jurisdiction.
The Authority administers the U.S. Department of Housing and Urban Development (HUD)-
funded Low Rent Public Housing and Section 8 Housing Choice Voucher programs. It owns,
manages, and maintains 355 housing units within its Low Rent Public Housing program. It was
awarded $702,325 under the Low Rent Public Housing program, $23,146,722 under the Housing
Choice Voucher program, and $459,914 under the Public Housing Capital Fund program for
fiscal year 2007.
We initiated the audit over concerns that the Authority may not have been in compliance with its
annual contributions contract, specifically its Payment-in-Lieu-of-Taxes obligations. Our
objective was to determine whether the Authority fulfilled its Payment-in-Lieu-of-Taxes
obligations for its Low Rent Public Housing program and if not, whether applicable funds were
used in accordance with HUD requirements.
4
RESULTS OF AUDIT
Finding 1: The Authority Disregarded Its Payment-in-Lieu-of-Taxes
Obligation
The Authority disregarded its Payment-in-Lieu-of-Taxes obligation contrary to its consolidated
annual contributions contract and cooperation agreement requirements. It also continued to
report its Payment-in-Lieu-of-Taxes obligations as an expense in its audited financial statements
and financial submissions to HUD. Authority management disregarded HUD regulations and
agreements due to concerns over funding. It also continued to inaccurately report Payment-in-
Lieu-of-Taxes expenses. As a result, the Authority received HUD funding for the operation of
its Low Rent Public Housing program that it did not expend for the continued operation of that
program, thus obligating HUD funds which could have been used to subsidize additional housing
expenses.
Payment-in-Lieu-of-Taxes
Obligation Requirements Were
Ignored
In May 2002, the Authority determined that it would no longer pay its Payment-in-Lieu-
of-Taxes obligation to the County of Ventura (County), including its cities of Ojai,
Moorpark, Camarillo and Thousand Oaks (Cities). The Authority claimed that due to
many new restrictions and requirements regarding its operations imposed by HUD, along
with reduced funding, its ability to maintain its program would face uncertainty if its
Payment-in-Lieu-of-Taxes obligation was paid. However, the County requested that the
Authority reconsider its position as the County also had continuing and increasing
financial obligations, which could only be met if all of its partners met their
commitments. No agreement was reached between the County and the Authority on the
waiver of the Payment-in-Lieu-of-Taxes obligation in question. The County has also
continued to provide public services and facilities for the Authority’s Low Rent Public
Housing program units, despite not being paid.
Further, the Authority had not requested or received written approval from HUD for the
amendment of its cooperation agreements as required in its annual contributions contract.
Therefore, it ignored both its cooperation agreements with the County, its Cities, and its
annual contributions contract (see appendix C).
5
The Payment-in-Lieu-of-Taxes
Obligation Was Used to
Determine Operating Subsidy
The Authority’s Low Rent Public Housing program operating subsidy funding was
determined by including a Payment-in-Lieu-of-Taxes expense in its calculation. The
Authority reported an expense for Payment-in-Lieu-of-Taxes in the amount of $96,756
for fiscal year 2007, $95,891 for fiscal year 2006, and $87,800 for fiscal year 2003 in its
financial submissions to HUD. Therefore, it incorrectly certified that it incurred
$280,447 in Payment-in-Lieu-of-Taxes expenses in its electronic filing of financial
information to HUD’s Real Estate Assessment Center system.
Further, it accrued the following Payment-in-Lieu-of-Taxes expenses for fiscal years
2001 through 2007:
Fiscal year Payment-in-Lieu-of-Taxes
ending due to the County
June 30, 2001 $85,746
June 30, 2002 87,294
June 30, 2003 87,800
June 30, 2004 91,246
June 30, 2005 92,695
June 30, 2006 95,891
June 30, 2007 96,756
Total $637,428
None of the amounts were paid to the County or the Cities. Moreover, although the
Authority accrued these amounts in its accounting records, it wrote the amounts off its
books, leaving no accrued liability to the County or the Cities for its Payment-in-Lieu-of-
Taxes obligations. This action was taken upon at the direction of Authority management
as the Authority had no intention of fulfilling it Payment-in-Lieu-of-Taxes obligations.
However, as the Authority did not seek or receive the approval from the County or HUD
for the waiver of its Payment-in-Lieu-of-Taxes obligation, it remained liable for
$637,428 in Payment-in-Lieu-of-Taxes fees to the County and the Cities. Nevertheless,
the Authority had been accruing this obligation in an interest bearing bank account.
For the calculation of the Authority’s Low Rent Public Housing program’s operating
subsidy for the years 2001 through 2006, a Payments-in-Lieu-of-Taxes expense was
included in computing its allowable expense level for the calculation of its yearly
operating subsidy. For calendar year 2007, the Authority requested and received
additional funding in the amount of $98,887 as an additional expense. The Authority
requested additional funding for its 2008 calendar year operating subsidy request, which
had not been finalized, yet had been distributed to the Authority in the amount of
6
$96,756. HUD provided additional funding for calendar years 2007 and 2008 for the
Payment-in-Lieu-of-Taxes expense for the Low Rent Public Housing program’s
operating subsidy. Thus, the Authority received HUD funding for the operation of its
Low Rent Public Housing program that it had not expended for the continued operation
of the program. As a result, the Authority received funding from HUD for Payment-in-
Lieu-of-Taxes obligations that it had not met or otherwise spent on the operation of the
Low Rent Public Housing program.
Conclusion
The Authority disregarded its Payment-in-Lieu-of-Taxes obligations and requirements for
fiscal years 2001 through 2008. Since this obligation was used to determine the
Authority’s operating subsidy, it was not only essential but required that HUD be notified
of any amendments made to the Authority’s cooperation agreements. Instead, the
Authority ceased all Payment-in-Lieu-of-Taxes payments and continued to report and
request funding for its Payment-in-Lieu-of-Taxes obligations. As a result, it incorrectly
certified that it had submitted accurate and complete financial data to HUD.
Consequently, the Authority received HUD funding for the operation of its Low Rent
Public Housing program that it did not expend for the continued operation of that
program, thus obligating HUD funds which could have been used to subsidize additional
housing expenses.
Recommendations
We recommend that the Director of the Los Angeles Office of Public Housing
1A. Require the Authority to comply with the annual contributions contract and
cooperation agreements with the County and the Cities by either settling its
Payment-in-Lieu-of-Taxes obligations to the County and the Cities in the amount of
$637,428 or reimbursing HUD $736,3151 for funding provided for years 2001
through 2008.
1
$637,428 includes a Payment-in-Lieu-of-Taxes obligation for the fiscal year ending June 30, 2007, in the amount
of $96,756. However, the Authority requested $98,887 for the calendar year ending December 31, 2007; therefore,
we adjusted the total amount due to the County and HUD in the amount of $2,131 to reflect actual funding provided
by HUD. The Authority also requested $96,756 from HUD to pay its Payment-in-Lieu-of-Taxes obligation for the
calendar year ending December 31, 2008.
7
SCOPE AND METHODOLOGY
We performed our on-site audit work from June 9 through July 8, 2008, at the Authority located
in Newbury, California. The audit generally covered the period July 2003 through June 2008.
We expanded our scope when necessary.
To accomplish our objectives, we
Reviewed applicable HUD regulations at 24 CFR [Code of Federal Regulations]
Parts 982 and 990, HUD’s Program Accounting Handbook 7420.6, and HUD’s
Low-Rent Technical Guide 7510.1G.
Obtained an understanding of the Authority’s procedures, including its controls to
ensure that it paid its Payment-in-Lieu-of-Taxes obligation.
Reviewed HUD’s Los Angeles Office of Public and Indian Housing files relating
to the Authority’s operating subsidy funding.
Reviewed the Authority’s independent public accountant reports for fiscal years
2003 through 2007.
Interviewed Authority finance personnel to acquire an understanding of the
Authority’s financial operations, practices, tracking, and controls.
Reviewed the Authority’s annual contributions contract and cooperation
agreement to determine Payment-in-Lieu-of-Taxes obligations and requirements.
Reviewed communication between the Authority and the County to determine
whether the Authority’s Payment-in-Lieu-of-Taxes obligations were properly
administered.
Reviewed bank statements, check registers, cash journal, and supporting
documentation related to the accrual and payment of Payment-In-Lieu-of-Taxes
for years 2001 through 2008.
We performed our review in accordance with generally accepted government auditing standards.
8
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:
Policies, procedures, and accounting controls that management has
implemented to ensure compliance with its Payment-in-Lieu-of-Taxes
obligation.
Policies and procedures that management has implemented to ensure
accurate, current, and complete disclosure of financial results.
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
Based on our review, we believe the following item is a significant weakness:
The Authority did not have sufficient controls in place to ensure that it paid
its Payment-in-Lieu-of-Taxes obligation in accordance with applicable laws
and regulations (see finding 1).
9
APPENDIXES
Appendix A
SCHEDULE OF FUNDS TO BE PUT TO BETTER USE
Recommendation number Funds to be put to better use 1/
1A $736,3152
1/ Recommendations that funds be put to better use are quantifiable savings that are
anticipated to occur if an Office of Inspector General (OIG) recommendation is
implemented. This includes reductions in outlays, deobligation of funds, withdrawal of
interest subsidy costs not incurred by implementing recommended improvements,
avoidance of unnecessary expenditures noted in preaward reviews, and any other savings
which are specifically identified. In this instance, if HUD implements our
recommendation, $736,315 in Low Rent Public Housing funds the Authority received
from HUD to be used for its Payment-in-Lieu-of-Taxes obligations would be put to better
use by allowing HUD to recapture the funds rather than allowing the funds to sit idle in a
bank account.
2
$637,428 includes a Payment-in-Lieu-of-Taxes obligation for the fiscal year ending June 30, 2007, in the amount
of $96,756. However, the Authority requested $98,887 for the calendar year ending December 31, 2007; therefore,
we adjusted the total amount due to the County and HUD to $2,131 to reflect actual funding provided by HUD. The
Authority also requested $96,756 from HUD to pay its Payment-in-Lieu-of-Taxes obligation for the calendar year
ending December 31, 2008.
10
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
11
12
Comment 1
Comment 2
13
Comment 3
Comment 4
Comment 1
Comment 4
Comment 5
14
Comment 1
Comment 3
Comment 1
Comment 3
Comment 5
Comment 6
15
Comment 7
16
Comment 8
17
OIG Evaluation of Auditee Comments
Comment 1 We disagree that the Authority complied with applicable laws and agreements.
The Authority passed a resolution contrary to the provisions of its cooperation
agreement(s) requirements and annual contributions contract with HUD.
Although Section 34401 of the California Health and Safety Code states that an
Authority is exempt from taxes and “may agree to make payments to any city,
county, or political subdivision of the State for services,” the Authority is also
subject to its annual contributions contract with HUD. Section 6 of the contract
stipulates that the Authority will “perform and comply with all applicable
provisions of the Cooperation Agreement(s), in the form prescribed by HUD,
including the making of payments in lieu of taxes.” In our opinion, the term “may
agree” indicates that the Authority has the opportunity to enter into such
cooperative agreements with its jurisdictions, not whether it has the option to
actually make the payments after entering into the agreement. Additionally, the
Authority has entered into cooperation agreements with its respective jurisdictions
and has not provided any amendments thereof. HUD entered into an agreement
with the Authority and provided funding for the intent of paying Payment-In-
Lieu-Of-Taxes obligations, but the Authority chose not to make the payments.
Therefore, the Authority is not in compliance with its annual contributions
contract with HUD and its cooperation agreements with its respective
jurisdictions. We also noted that at no time did the Authority approach HUD and
either inform HUD that it was no longer going to make payments, or obtain a
written waiver or approval to do so.
Comment 2 The Authority’s Executive Director is responsible for the Authority’s compliance
with the Annual Contributions Contract with HUD. If the amount of the HUD
subsidy left the Authority in a position in which it was unable to fully comply
with the Annual Contributions Contract, the Executive Director should have
sought guidance from HUD and/or written approval to discontinue making the
agreed upon payments.
Comment 3 The Authority did not provide any documentation outlining the verbal agreement
with its respective jurisdictions for the approval to withhold its Payment-In-Lieu-
Of-Taxes obligations. In our opinion, this does not make sense that the
jurisdictions would agree to continue providing services, but not expect to be
paid. Additionally, correspondence between the Authority and the County of
Ventura, one of its jurisdictions, shows there was never an agreement made for
the withholding of Payment-In-Lieu-Of-Taxes payments. Contrary, the County
requested that the Authority reconsider its decision to withhold its required
Payment-In-Lieu-Of-Taxes payments as they too had continuing and increasing
financial obligations, which could only be met if all of its partners met their
commitments. Given the above, we also question why the Authority chose not to
make any payments at all, and why partial payments were not considered.
18
Comment 4 The Authority’s cooperation agreements all require that “an annual Payment in
Lieu of Taxes (PILOT) will be made at the end of each fiscal year in the amount
of ten percent (10%) of the Shelter Rent charged by the HA to its tenants or the
amount permitted by applicable state law, whichever amount is lower.” Further, in
section 9 of the agreements, it states that the “agreement shall not be abrogated,
changed, or modified without the consent of the Government.” The Authority
claims to have entered into a mutual agreement with its jurisdictions to amend,
change the amount of Payment-In-Lieu-Of-Taxes paid by withholding such
payments. Thus, the Authority did in fact amend its cooperation agreements if it
attained the required approval from each of its jurisdictions and therefore requires
written approval from HUD. Nonetheless, the Authority decided to withhold its
Payment-In-Lieu-Of-Taxes obligations and continued to receive (for years 2001
through 2008) and request additional funding (for 2007 and 2008) for the payment
of this obligated amount.
Comment 5 We disagree. While the Authority may not have suffered any material
consequences, both the jurisdictions and HUD did. As acknowledged by the
Authority, the jurisdictions continued to provide the agreed upon services, but at
its own expense. This provided an additional financial burden on these
jurisdictions. In addition, HUD provided funding to the Authority, which was not
used as intended. The Authority provides an operational budget to HUD every
year for the funding of its Low Rent Public Housing program where according to
Chapter 2, Section 6, of the Public and Indian Housing Low-Rent Technical
Accounting Guide, 7510.1, “the budget constitutes the approved plan for
expenditure of those funds.” Moreover, “HA[s] must use the HUD-prescribed
categories for the budget estimates and for subsequent financial transactions. The
line item identification of the costs defines the approved use of the HUD funds to
be provided, and the approved spending level for the HA in that program area.”
HUD provided funding for the Authority’s Payment-In-Lieu-Of-Taxes obligations
for years 2001 through 2008; funds that were not expended by the Authority as
such. Thus, Low Rent Public Housing funds the Authority received from HUD
funding to be used for its Payment-in-Lieu-of-Taxes obligations could have been
used to subsidize other HUD programs rather than allowing the funds to sit idle in
an interest bearing bank account.
Comment 6 We acknowledge that the Authority utilizes the accrual method of accounting in
accordance with Generally Accepted Accounting Principles as the basis of its
financial reporting. Further, we also recognize that the Authority's fiscal year
ends on June 30. The Authority also waits until all rent revenue is recorded for its
respective fiscal year, which occurs after June 30th, to accurately calculate its
Payment-In-Lieu-Of-Taxes obligation. We did not take issue with any of these
practices. However, we do take issue with the fact that the accruing and reporting
of a liability that the Authority has no intention of paying is considered to be
inaccurate financial reporting.
19
Based on general ledger reports for the Authority’s Payment-In-Lieu-Of-Taxes
liability account, it had accrued for each year's Payment-In-Lieu-Of-Taxes
obligation since 2001. However, it wrote off accruals for 2001 through 2004 at
the decision of its management team as they had no intention of making the
obligated Payment-In-Lieu-Of-Taxes payments. The accruals/liability were never
recorded for fiscal year 2005 and the Authority resumed its Payment-In-Lieu-Of-
Taxes accrual for fiscal years 2006 and 2007. The accrual for fiscal year 2006
was written off in fiscal year ended 2007. As a result, the liability account for its
Payment-In-Lieu-Of-Taxes obligation had a balance of $96,756, its Payment-In-
Lieu-Of-Taxes calculation for fiscal year 2007, as of June 4, 2008. Because our
audit coincided with the Authority’s fiscal year end, it was in the process of
calculating and recording its Payment-In-Lieu-Of-Taxes obligation for its fiscal
year 2008.
As a result, the Authority has incorrectly reported Payment-In-Lieu-Of-Taxes
expenses incurred for fiscal years 2007, 2006 and 2003 in its audited financial
statements. Additionally, it has also reported to HUD Payment-In-Lieu-Of-Taxes
expenses for fiscal years 2007, 2006 and 2003 it had not incurred as they had no
intention of making the obligated Payment-In-Lieu-Of-Taxes payments.
Comment 7 At both the entrance conference with the Authority and meetings with Authority
personnel during the audit fieldwork, the Authority assured us that all funds
accrued and received for the payment of its Payment-In-Lieu-Of-Taxes
obligations were accounted for and set aside in a bank account. At no time during
the fieldwork did the Authority inform us that, or provide any documentation
showing that Payment-In-Lieu-Of-Taxes funds were used to cover operational
shortfalls. Authority management asserted it had maintained all funds and had
not used such funds for any other purpose. The Authority also provided us with
bank statements to an investment account showing that it maintained the
Payment-In-Lieu-Of-Taxes funds in that account, with a total balance of $7.9
million.
Additionally, we noted in Chapter 2, Section 6, of the Public and Indian Housing
Low-Rent Technical Accounting Guide, 7510.1 it states that “the program area
budget is based on the objectives of the program and the projected availability of
funds for program outlays. Since funds provided by HUD for a particular
program or purpose must be used only for that program or purpose, the budget
constitutes the approved plan for expenditure of those funds.” Moreover, “HA[s]
must use the HUD-prescribed categories for the budget estimates and for
subsequent financial transactions. The line item identification of the costs defines
the approved use of the HUD funds to be provided, and the approved spending
level for the HA in that program area. Once approved, a budget becomes both a
blueprint for action and a control mechanism.” Finally, Section 7 also outlines
that all funds provided by HUD to a Housing Authority are for a particular
program or purpose where “in each instance, the use of those funds is governed
20
by the program regulations, the program budget which constitutes the approved
plan for expenditures of those funds.”
A Payments-in-Lieu-of-Taxes expense was included in computing the Authority’s
allowable expense level for the calculation of its yearly operating subsidy for the
years 2001 through 2006 and for calendar years 2007 and 2008 they requested
and received additional funding for the payment of its Payments-in-Lieu-of-Taxes
expense they had no intention of fulfilling. In addition, even though the Authority
claims it expended a portion of the accrued funds intended for the fulfillment of
its Payments-in-Lieu-of-Taxes obligation, HUD provided funding specifically for
the intention of the payment of the Authority’s Payments-in-Lieu-of-Taxes
obligation. Therefore, they did not use the funds in a manner consistent with
HUD regulations. As a result, $736,315 in Low Rent Public Housing funds the
Authority received from HUD to be used for its Payment-in-Lieu-of-Taxes
obligations could have been used to subsidize other HUD programs rather than
allowing the funds to sit idle in an interest bearing bank account.
Comment 8 We disagree. As stated in the Internal Controls section of the report, internal
control is an integral component of an organization’s management that provides
reasonable assurance that the organization complies with applicable laws and
regulations. We concluded that there was a significant weakness in the
Authority’s internal controls because it did not ensure that it paid the Payment-In-
Lieu-Of-Taxes obligations as required by the Annual Contributions Contract with
HUD and the cooperative agreements with its jurisdictions. The Authority passed
a resolution contrary to its Cooperation Agreement(s) requirements and Annual
Contributions Contract with HUD. The Authority’s Board of Commissioners
passed a resolution to stop its Payment-In-Lieu-Of-Taxes payments; however,
failed to provide documentation of the waiver/ agreement of such action from
each of its jurisdictions.
21
Appendix C
CRITERIA
Consolidated Annual Contributions Contract, Number SF-568, March 21, 2002, states as
follows:
Section 6, Cooperation Agreement(s), states that the Authority must perform and
comply with all applicable provisions of the cooperation agreement(s) including the
making of payments in lieu of taxes. The Authority may not terminate or amend the
cooperation agreement(s) without the written approval of HUD.
Section 9(C)(1), Depository Agreement and General Fund, states that the Authority
may only use funds outlined under the annual contributions contract for payment of
expenses related to the development and operation of projects controlled under the
provisions of the annual contributions contract.
The cooperation agreement between the County and the Authority, section 9, requires the
Authority to pay an annual Payment-in-Lieu-of-Taxes to the County at the end of each fiscal
year in the amount of 10 percent of the shelter rent received from its tenants or the amount
permitted by applicable state law, whichever amount is lower. Additionally, it states that the
agreement cannot be modified without the consent of HUD.
24 CFR 982.153, PHA [public housing authority] Responsibilities, requires public housing
authorities to “comply with the consolidated ACC [annual contributions contract], the
application, HUD regulations and other requirements, and the PHA administrative plan.”
24 CFR 982.156, Depositary [sic] for Program Funds, states that a “PHA [public housing
authority] may only withdraw deposited program receipts for use in connection with the program
in accordance with HUD requirements.”
24 CFR 990.105(a), Computation of Base Year Expense Level, states that Payments-in-Lieu-
of-Taxes required by an authority’s cooperation agreement are to be included as part of the base
year expense level used to compute its allowable expense level for the calculation of an
authority’s yearly operating subsidy.
24 CFR 990.190(c), Other Formula Expenses (add-ons), states that in addition to calculating a
public housing authority’s operating subsidy based on the project and utilities expense level, an
authority’s eligible formula expenses, used to calculate its operating subsidy, may be increased
by allowed add-on expenses. An amount for payment in lieu of taxes in accordance with section
6(d) of the United States Housing Act of 1937 may be added as an eligible expense in
determining the authority’s annual operating subsidy.
PIH [Public and Indian Housing] Low-Rent Technical Accounting Guide 7510.1G, chapter
2-13, requires housing authorities to establish sufficient controls to ensure proper accounting for
cash and fill identification of audit trails. “Accounting controls ensure that the accounting
22
system used by the HA [housing authority] accurately identifies the source, use, and remaining
balance of individual program cash resources.” Additionally, all funds received from HUD
program funding are “restricted to the specific purposes authorized in the program budgets.”
Chapter 2-15, stipulates that although funds may be pooled together for any expenditures
chargeable to the housing authority’s programs, program funds are not fungible, and “funds shall
not be withdrawn for a program in excess of the amount of funds on deposit for that particular
program.” All funds pooled together that result in “due to/due from” transactions must be
“reconciled at the end of each reporting period to ensure that they are in balance.” Further,
chapter 11-16 specifies that all funds provided by HUD are to be used by the housing authority
only for the purposes for which the funds are authorized.
23
The Housing Authority of the County of Ventura, Payment-in-Lieu-of-Taxes Obligations
Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-11-25.
Below is a raw (and likely hideous) rendition of the original report. (PDF)