oversight

The DuPage Housing Authority, Wheaton, IL, Inappropriately Administered Its Section 8 Housing Choice Voucher Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-03-23.

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

                                                                   Issue Date
                                                                            March 23, 2011
                                                                   
                                                                   Audit Report Number
                                                                                2011-CH-1006




TO:         Steven Meiss, Director of Public Housing Hub, 5APH
            Craig Clemmensen, Director of Departmental Enforcement Center, CACB
            Maurice McGough, Acting Director of Fair Housing and Equal Opportunity
               Hub, 5AEH


FROM:       Ronald Farrell, Acting Regional Inspector General for Audit, 5AGA

SUBJECT: The DuPage Housing Authority, Wheaton, IL, Inappropriately Administered Its
           Section 8 Housing Choice Voucher Program


                                    HIGHLIGHTS

 What We Audited and Why

             We audited the DuPage Housing Authority’s (Authority) Section 8 Housing
             Choice Voucher program (program). The audit was part of the activities in our
             fiscal year 2010 annual audit plan. We selected the Authority based on the results
             of our audits of its Project-Based Voucher program. Our objective was to
             determine whether the Authority effectively administered its program in
             accordance with the U.S. Department of Housing and Urban Development’s
             (HUD) requirements and its administrative plan. This is the third of three audit
             reports on the Authority’s programs.

 What We Found

             As identified in this and our prior two audits, the Authority (1) did not maintain
             adequate documentation to support the eligibility of its Section 8 Project-Based
             Voucher program projects, (2) executed housing assistance payments contracts
             with inappropriate contract rents, (3) did not properly select Section 8 Project-
         Based Voucher program households from waiting lists, (4) lacked controls over
         housing assistance and utility allowance payments, (5) did not appropriately
         manage its program funds, and (6) did not properly select Section 8 Housing
         Choice Voucher program households from its waiting list. As a result, HUD had
         no assurance that the Authority’s resources were used to benefit low- and
         moderate-income individuals.

         The Authority did not manage its program funds in accordance with HUD’s
         requirements and its policies. It had unallowable and questionable transactions,
         did not correctly report its financial standing to HUD, did not maintain complete
         and accurate records, and miscalculated its net restricted assets. This
         noncompliance occurred because the Authority disregarded HUD’s requirements
         and directives, lacked an understanding of program regulations, and failed to
         implement adequate procedures and controls. As a result, the Authority used
         more than $2.3 million in program funds for transactions not related to its
         program and was unable to support the use of more than $330,000 in program
         funds.

         The Authority did not follow HUD’s requirements and directives and its program
         administrative plan regarding the selection of program households. It did not
         properly select all program households from its waiting list. Instead, it admitted
         146 households based on referrals. This noncompliance occurred because the
         Authority disregarded HUD’s regulations and guidance and its program
         administrative plan. As a result, it inappropriately paid more than $2.6 million in
         housing assistance to households that were inappropriately admitted to its
         program. In addition, the Authority was unable to support that nearly $70,000 in
         funds received from the City of Chicago was used toward housing assistance
         payments.

         We informed the Authority’s executive director and the Director of HUD’s
         Chicago Office of Public Housing of a minor deficiency through a memorandum,
         dated March 22, 2011.

What We Recommend

         We recommend that the Director of HUD’s Chicago Office of Public Housing
         require the Authority to (1) reimburse its program from non-Federal funds for the
         improper use of nearly $5.1 million in program funds, (2) provide documentation
         or reimburse its program from non-Federal funds for the unsupported use of more
         than $400,000 in program funds, and (3) implement a detailed comprehensive
         plan to improve its programs.

         We also recommend that the Director of HUD’s Chicago Office of Public
         Housing, in conjunction with the Director of HUD’s Departmental Enforcement
         Center, take administrative action against the executive director and board of



                                          2
           commissioners for failing to administer the Authority effectively and in
           accordance with HUD’s and its own requirements. Additionally, we recommend
           that the Acting Director of HUD’s Chicago Office of Fair Housing and Equal
           Opportunity review the Authority’s household selections to ensure that they
           comply with HUD’s requirements. If the Authority fails to comply with HUD’s
           requirements, the Acting Director should take appropriate action against the
           Authority and/or its applicable employee(s).

           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 our review results and supporting schedules to the Director of
           HUD’s Chicago Office of Public Housing and the Authority’s executive director
           during the audit. We also provided our discussion draft audit report to the
           Authority’s executive director, its board chairman, and HUD’s staff during the
           audit. We held an exit conference with the Authority’s executive director on
           February 24, 2011.

           We asked the Authority’s executive director to provide comments on our
           discussion draft audit report by February 28, 2011. The Authority’s executive
           director provided written comments, dated February 25, 2011. The executive
           director agreed with the report 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 except for 41 pages of documentation that were not necessary for
           understanding the Authority’s comments. A complete copy of the Authority’s
           comments was provided to the Director of HUD’s Chicago Office of Public
           Housing.




                                            3
                            TABLE OF CONTENTS

Background and Objective                                                         5

Results of Audit
      Finding 1: The Authority Did Not Administer Its Programs According to
                 HUD’s and Its Requirements                                      6
      Finding 2: The Authority Did Not Appropriately Manage Its Program Funds    10
      Finding 3: The Authority Did Not Properly Select Program Households From
                 Its Waiting List                                                16

Scope and Methodology                                                            20

Internal Controls                                                                22

Appendixes
   A. Schedule of Questioned Costs and Funds To Be Put to Better Use             24
   B. Auditee Comments and OIG’s Evaluation                                      25
   C. Federal Requirements and the Authority’s Program Administrative Plan       37




                                            4
                       BACKGROUND AND OBJECTIVE

The DuPage Housing Authority (Authority) was established by the State Housing Board of Illinois
in September 1942 under the laws of the State of Illinois to provide decent, safe, and sanitary
housing. The Authority is governed by a seven-member board of commissioners (board) appointed
by the chairman of the DuPage County Board to 5-year staggered terms. The board’s
responsibilities include overseeing the administration of the Authority and approving policies. The
board appoints the Authority’s executive director. The executive director is responsible for ensuring
that policies are followed and providing oversight of the Authority’s programs.

The Authority administers a Section 8 Housing Choice Voucher program (program) funded by the
U.S. Department of Housing and Urban Development (HUD). It provides assistance to low- and
moderate-income individuals seeking decent, safe, and sanitary housing by subsidizing rents with
owners of existing private housing. As of January 1, 2011, the Authority had 2,693 units under
contract with annual housing assistance payments totaling more than $22.6 million in program
funds.

This is the third of three planned audits of the Authority’s programs. Our objective was to
determine whether the Authority effectively administered its program in accordance with HUD’s
requirements and its program administration plan to include determining whether it (1) administered
its HUD-funded programs in accordance with Federal and its own requirements, (2) appropriately
used program funds for program activities, and (3) selected applicants from the program waiting
list. The previous audits reported on the Authority’s Project-Based Voucher program. The first
audit report (report #2009-CH-1016, issued on September 28, 2009) included one finding. The
objective of the first audit was to determine whether the Authority effectively administered its
Section 8 Project-Based Voucher program in accordance with HUD’s requirements to include
determining whether the Authority (1) maintained adequate documentation to support program
household eligibility and (2) accurately calculated housing assistance and utility allowance
payments. The second audit report (report #2010-CH-1008, issued on June 15, 2010) included three
findings. The objective of the second audit was to determine whether the Authority effectively
administered its Section 8 Project-Based Voucher program in accordance with HUD’s requirements
and its program administrative plan to include determining whether it (1) maintained adequate
documentation to support project eligibility, (2) executed housing assistance payments contracts
with appropriate contract rents, and (3) appropriately selected program households from the waiting
list.




                                                 5
                                RESULTS OF AUDIT

Finding 1: The Authority Did Not Administer Its Programs According
                   to HUD’s and Its Requirements
The Authority’s board of commissioners did not adequately exercise its responsibility to oversee
the administration of the Authority’s programs. The Authority’s executive director did not
implement adequate controls over its operations and did not follow HUD’s requirements or the
Authority’s policies. As a result, HUD lacked assurance that the Authority’s resources were
used to benefit low- and moderate-income individuals.



 The Authority’s Management
 Did Not Effectively Oversee
 Operations

              As identified in this and the prior two audits, the Authority (1) did not maintain
              adequate documentation to support the eligibility of its Section 8 Project-Based
              Voucher program projects, (2) executed housing assistance payments contracts with
              inappropriate contract rents, (3) did not properly select Section 8 Project-Based
              Voucher program households from waiting lists, (4) lacked controls over housing
              assistance and utility allowance payments, (5) did not appropriately manage its
              program funds, and (6) did not properly select Section 8 Housing Choice Voucher
              program households from its waiting list. Specifically, under the direction of the
              executive director and board of commissioners, the Authority

                     Inappropriately administered its Section 8 Project-Based Voucher program.
                      The Authority did not maintain adequate documentation to support the
                      eligibility of its projects. Based on the information maintained in its files,
                      the Authority did not issue appropriate requests for proposals, properly
                      evaluate project proposals, request HUD approval for projects with conflicts
                      of interest, ensure that agreements and housing assistance payments
                      contracts included the required elements, ensure that environmental and
                      subsidy-layering reviews were conducted, and conduct rent reasonableness
                      and housing quality standards inspections for all project units under contract.
                      This noncompliance occurred because the Authority lacked an understanding
                      of the regulations and failed to implement procedures and controls to ensure
                      that HUD’s requirements were appropriately followed. As a result, the
                      Authority disbursed more than $3.4 million in housing assistance for project
                      units without documentation to support the projects’ eligibility. In addition,
                      it made inappropriate retroactive payments totaling more than $33,000 for
                      two of the projects (report #2010-CH-1008, issued on June 15, 2010).




                                                 6
   Executed housing assistance payments contracts with inappropriate contract
    rents. The contract rents for six of the Authority’s 11 Section 8 Project-
    Based Voucher program projects exceeded the maximum allowable amounts
    according to HUD’s requirements. This noncompliance occurred because
    the Authority lacked an understanding of the program regulations and
    inappropriately followed advice from county officials. As a result, it
    overpaid more than $260,000 in housing assistance (report #2010-CH-1008,
    issued on June 15, 2010).

   Did not properly select Section 8 Project-Based Voucher program
    households from waiting lists. Instead, the Authority allowed its projects to
    select households and did not perform quality control reviews of the
    selection process. This noncompliance occurred because the Authority did
    not maintain waiting lists for its projects in accordance with HUD’s
    regulations and its administrative plan. As a result, the Authority
    inappropriately paid more than $188,000 in housing assistance for
    households that did not meet project eligibility requirements and was unable
    to support more than $57,000 in housing assistance payments (report #2010-
    CH-1008, issued on June 15, 2010).

   Did not ensure that its household files contained the required documentation
    to support households’ admission to and continued assistance on the Section
    8 Project-Based Voucher program and accurately calculate housing
    assistance payments. This noncompliance occurred because the Authority
    lacked controls to ensure that HUD’s requirements and its administrative
    plan were appropriately followed. As a result, it was unable to support more
    than $400,000 in housing assistance and utility allowance payments. In
    addition, it overpaid more than $4,000 and underpaid nearly $2,000 in
    housing assistance and utility allowances (report #2009-CH-1016, issued on
    September 28, 2009).

   Did not manage its program funds in accordance with HUD’s requirements
    and its policies. This noncompliance occurred because the Authority
    disregarded HUD’s requirements and directives, lacked an understanding of
    the program regulations, and failed to implement adequate controls. As a
    result, it used more than $2.3 million in program funds for transactions not
    related to its program and was unable to support the use of more than
    $330,000 in program funds (see finding 2 in this report).

   Did not properly select all program households from its waiting list. Instead,
    it admitted households based on referrals. This noncompliance occurred
    because the Authority disregarded HUD’s regulations and guidance and its
    program administrative plan. As a result, it inappropriately paid more than
    $2.6 million in housing assistance for households that were inappropriately
    admitted to its program. In addition, it was unable to support that nearly




                              7
                   $70,000 in funds received from the City of Chicago (City) was used toward
                   housing assistance payments (see finding 3 in this report).

Prior HUD Reviews Identified
Deficiencies

            HUD conducted a monitoring review of the Authority and issued its report on March
            31, 2008. The monitoring review consisted of five separate reviews: (1) rental
            integrity monitoring review, (2) Section 8 management review, (3) financial review,
            (4) facilities review, and (5) upfront income verification review. The monitoring
            review resulted in nine findings. The Authority

                  Did not accurately calculate income by the tenant,
                  Did not accurately calculate utilities paid by the tenant,
                  Did not maintain a copy of the documentation used to verify Social Security
                   numbers,
                  Did not organize its waiting list in accordance with its administrative plan,
                  Performed improper and unauthorized transfers of Section 8 Housing Choice
                   Voucher program administrative fee reserves from 2005 through 2007 to
                   fund business activities,
                  Could not provide board-approved resolutions for policies and procedures,
                  Approved a travel policy with references to unallowable costs,
                  Made several purchases with its FIA Card Services and National Association
                   for the Exchange of Industrial Resources that were either unallowable or
                   questionable costs, and
                  Did not have a policy and written procedures detailing credit card use by
                   staff.

            These deficiencies were also cited in our audit reports.

The Authority Violated Its
Contract With HUD

            As discussed in this and the prior two audit reports, the Authority violated its
            contract with HUD when it used more than $2.3 million in program funds for
            unallowable expenditures and was unable to support the additional use of more than
            $330,000 in program funds. In addition, the Authority disregarded HUD’s
            requirements and directives and failed to implement adequate procedures and
            controls to ensure that it was accountable for its use of program funds and complied
            with its contract with HUD.

            In addition, the Authority failed to maintain complete and accurate books of
            account and records in accordance with its contract with HUD. It did not
            maintain documentation to support more than $3.4 million in housing assistance


                                              8
             payments for project units, more than $400,000 in housing assistance and utility
             allowance payments for Section 8 Project-Based Voucher program households,
             and more than $330,000 in program expenditures.


Conclusion


             The deficiencies in the Authority’s programs were significant and demonstrated a
             lack of effective program management. As identified in this and the prior two
             audits, the Authority did not effectively manage its Section 8 Project-Based
             Voucher program or Section 8 Housing Choice Voucher program. It failed to
             maintain adequate supporting documentation, execute appropriate housing
             assistance payments contracts, appropriately manage its program funds, select
             households from program waiting lists, and implement adequate procedures and
             controls. This noncompliance occurred because the Authority lacked an
             understanding of HUD’s regulations and disregarded HUD’s requirements and its
             policies and procedures. As a result, the Authority used more than $5.8 million in
             program funds for inappropriate program expenditures and was unable to support
             the use of more than $4.7 million.


Recommendations


             We recommend that the Director of HUD’s Chicago Office of Public Housing, in
             conjunction with the Director of HUD’s Departmental Enforcement Center,

             1A. Take administrative action against the executive director and board of
                 commissioners for failing to administer the Authority according to HUD’s and
                 its own requirements.




                                              9
Finding 2: The Authority Did Not Appropriately Manage Its Program
                               Funds
The Authority did not manage its program funds in accordance with HUD’s requirements and its
policies. The problems occurred because the Authority disregarded HUD’s requirements and
directives, lacked an understanding of the program regulations, and failed to implement adequate
controls. As a result, it used more than $2.3 million in program funds for transactions not related
to its program, and was unable to support the use of more than $330,000 in program funds.



 The Authority Inappropriately
 Administered Its Program
 Funds

               We reviewed the Authority’s financial accounts and reports effective July 2008
               through June 2010 to determine whether the Authority appropriately used
               program funds for program activities in accordance with HUD’s requirements and
               its program administrative plan, policies, and procedures. Based on our review,
               the Authority had unallowable and questionable transactions, did not correctly
               report its financial standing to HUD, did not maintain complete and accurate
               records, and miscalculated its net restricted assets.

 The Authority Had
 Unallowable and Questionable
 Transactions

               The Authority did not follow HUD’s regulations and its own policies and
               procedures regarding the use of program funds. We reviewed the vendor invoices
               and receipts for 298 account transactions from the Authority’s general ledger
               from July 2008 through June 2010 to determine whether they were for activities
               related to the Authority’s program in accordance with HUD requirements. The
               298 general ledger transactions represented 639 transactions. Of the 639
               transactions reviewed, 369 (57 percent) were unallowable for the Authority’s
               program. The Authority used $2,303,853 in program funds for the unallowable
               transactions, which included

                      Loans to its affiliates for activities not related to its program;
                      Flower, meal, clothing, and beverage purchases for Authority staff;
                      National Association for the Exchange of Industrial Resources orders
                       including an area light, a spotlight, and an assortment of faucets; and
                      Christmas gifts and laptop computers for its board commissioners.




                                                10
According to the executive director, HUD’s rules regarding expenses were vague,
and he was responsible for determining what was appropriate. It was his
judgment that the expenses for meals, flowers, clothing, and beverages for the
Authority staff constituted appropriate use of program funds. According to the
executive vice president, these items improved employee morale and, therefore,
benefited the program. In addition, the executive director said that the National
Association for the Exchange of Industrial Resources purchases should have been
paid with non-Federal funds and were mistakenly included in the Authority’s
expenses. However, the Authority lacked adequate controls to ensure that
program funds were not used for unallowable purchases.

In addition, the Authority was unable to support the use of $330,457 in program
funds. Of the 639 transactions reviewed, the Authority was unable to provide
receipts or invoices for 183 (28 percent) transactions.

HUD conducted a financial review of the Authority in February 2008. The
findings, provided to the Authority in March 2008, included the improper use of
program funds, unallowable or questionable costs, and inappropriate travel and
credit card policies. In its financial report, HUD told the Authority not to transfer
additional funds for business activities without HUD approval. However, the
Authority transferred $300,000 to an affiliate in July and August 2009 and paid
expenses totaling $10,656 for one of the Authority’s development properties from
July 2008 through January 2009. According to the Authority’s executive vice
president, the transfers totaling $300,000 were temporary loans that he thought
were permitted under the program. However, HUD’s requirements state that
administrative fees may never be loaned to another program, regardless of
whether the Authority intends to reimburse the program at a later date.

In its financial report, HUD cited that the Authority’s travel policy included a
reference to an unallowable cost. According to the report, the Authority’s travel
policy included a chairman’s dinner, which would occur at each event at the
expense of the agency. The Authority updated its policy to state that the
chairman’s dinner would be paid with non-Federal funds. However, in March
2010, the Authority used program funds to pay for a chairman’s dinner.
According to the Authority’s executive director, the expense was mistakenly
included in the Authority’s general ledger and should have been paid for with
non-Federal funds. The Authority did not have controls in place to prevent the
improper payment of expenditures not related to its program. The executive
director stated that the Authority needed to look into the realignment of some
staff.

HUD’s financial report stated that the Authority did not have a policy detailing its
credit card use and that too many board and staff members had Authority credit
cards. The Authority adopted a credit card policy in June 2008. The policy, as
updated in August 2008, stated that only the executive director, chief financial
officer, and director of development were empowered to have credit cards. Based



                                 11
            on our review, the Authority provided credit cards to two additional staff
            members not listed in its policy. In addition, the Authority’s credit card policy
            stated that the invoices were submitted to the executive director for initial
            approval and the chief financial officer checked the invoices for proper
            classification and appropriateness. However, of the 102 credit card transactions
            reviewed, 60 were unsupported, and 64 were misclassified on the Authority’s
            general ledger.

            The Authority did not maintain proper oversight of its travel and training
            procedures. Of the 639 transactions reviewed, 208 were related to training and
            travel. Of the 208 training and travel transactions, 127 (61 percent) were
            unallowable for the Authority’s program. The unallowable training and travel
            transactions included

                  Alcohol purchases,
                  Expenses for travel companions, and
                  Unreimbursed training travel for the Kendall Housing Authority staff.

            According to the Authority’s executive vice president, the Authority had an
            agreement with the Kendall Housing Authority to provide trained staff, for which
            the Authority received administrative fees. However, as of March 2009, the
            administrative fees had been paid to DHA Development, an Authority affiliate,
            and the travel and training expenses had not been reimbursed to the Authority.
            According to the Authority’s travel policy, travel expenses for companions are
            nonqualified expenses. The Authority’s executive vice president stated that he
            reviewed the travel expense reports but did not review all of them and that the
            Authority did not have sufficient staff to do what needed to be done correctly.

The Authority Did Not
Correctly Report Its Financial
Standing to HUD

            The Authority did not correctly report its financial standing to HUD. The
            information reported to HUD through its Voucher Management System was
            submitted in a timely manner. However, the Authority reported information that
            was incorrectly calculated or not supported by its general ledger. Of the 20 reports
            reviewed, 14 included information that was incorrectly calculated or did not agree
            with the Authority’s general ledger. The reports included the following errors:

                  The reports submitted in June 2009 through May 2010 included incorrect
                   values for fraud recoveries.

                  The reports submitted in January through May 2010 included incorrect
                   values for cash and investments. The Authority inappropriately included a
                   line of credit as part of its assets.



                                             12
                 The reports submitted in January and December 2009 did not include interest
                  earned although it was listed in the general ledger.

                 The reports submitted in January and October 2009 did not include audit
                  expenses although they were listed in the general ledger.

           Based on our review, the difference in the cash and investment value reported to
           HUD through its Voucher Management System from January through May 2010
           and the amount included in the Authority’s accounts was $750,000, which is the
           amount authorized by MB Financial to the Authority as a line of credit.
           According to the Authority’s executive director, the line of credit was taken out to
           cover housing assistance payments in case HUD did not provide funds to the
           Authority in a timely manner. In addition, the executive vice president stated that
           the Authority took out the line of credit at the end of each fiscal year for its
           financial statements and it was then repaid. However, the Authority incurred
           more than $8,000 in interest payments in 2008 and 2009 for the line of credit.
           According to HUD’s requirements, the Authority is responsible for operating its
           program within the amount of funding provided. Therefore, the Authority did not
           require a line of credit and the interest incurred was unallowable.

The Authority Did Not
Maintain Complete and
Accurate Records

           The Authority did not maintain complete and accurate records. It did not
           maintain subsidiary ledgers or support for all of the transactions included in its
           general ledger. Because the Authority did not maintain subsidiary ledgers, it was
           unable to determine whether program funds received were used for appropriate
           program activities or for specified households. In addition, of the 639
           transactions reviewed, the Authority was unable to provide supporting
           documentation for 183 transactions. The 183 transactions totaled more than $2.5
           million in program funds.

           The Authority did not correctly classify account transactions in its general ledger.
           Of the 639 transactions reviewed, 169 (26 percent) were inappropriately
           classified. The Authority’s executive vice president stated that although he did
           not necessarily disagree that the transactions were misclassified, he did not
           understand why it mattered since an expense is an expense. The inappropriate
           classifications included

                 Water and sewer payments, meals, and parking classified under
                  miscellaneous;
                 National Association for the Exchange of Industrial Resources orders
                  classified under office supplies;



                                            13
                    Christmas gifts classified under travel;
                    Meal, food, and beverage purchases classified under utilities and office
                     supplies;
                    Apple iPhone purchase classified under conferences/seminars/meetings;
                     and
                    Flowers and local meal purchases classified under travel.

             The Authority did not correctly report noncash benefits provided to the executive
             director. According to the executive director’s employment contract, he was
             provided with a vehicle, which could be used for personal matters. However, the
             Authority did not include the noncash benefit for the personal use of the vehicle in
             its payroll for 2006 through 2009. In addition, the executive director stated that
             the $112 monthly health club membership fees were paid for him based on this
             employment contract. However, the employment contract did not include the
             benefit of a health club membership.

The Authority Miscalculated Its
Net Restricted Assets

             Based on the Authority’s accounts, it did not correctly calculate its net restricted
             assets reported to HUD. The net restricted assets reported to HUD from January
             through May 2010 were on average nearly $400,000 less than the amount supported
             by the Authority’s accounts. The Authority failed to include Family Unification
             Program and Disaster Housing Assistance Payment program funding received from
             HUD in its calculation. In addition, it did not include the Family Self-Sufficiency
             program forfeitures in the calculations. Further, it did not use the net restricted asset
             balance agreed upon by HUD in June 2009 as the baseline for its calculations.

             The Authority’s account balances indicated that it did not have sufficient funds to
             support its calculation of net restricted assets. From January through May 2010,
             the Authority’s average net restricted assets were more than $2 million. However,
             during the same period, the Authority had only an average of $1.37 million in
             cash and investments. According to HUD, the cash and investments held by the
             Authority must be sufficient to cover the net restricted assets and be readily
             available. In addition, their use is limited to housing assistance payments.
             Because the Authority’s account balances did not support its calculation of net
             restricted assets, HUD lacked assurance that the Authority did not use its net
             restricted assets to finance its business operations.



Conclusion




                                                14
          HUD lacked assurance that program funds were used to benefit low- and
          moderate-income individuals. The Authority did not properly use program funds
          when it failed to ensure that its accounts were accurate and complete in
          accordance with HUD’s regulations. It also disregarded HUD’s directives, lacked
          an understanding of program regulations, and failed to implement controls to
          ensure that HUD’s requirements were appropriately followed. It used more than
          $2.3 million in program funds for transactions not related to its program. In
          addition, it was unable to support the use of $330,457 in program funds.


Recommendations


          We recommend that the Director of HUD’s Chicago Office of Public Housing
          require the Authority to

          2A. Reimburse its program $2,303,853 from non-Federal funds for the
              unallowable transactions cited in this finding.

          2B. Provide supporting documentation or reimburse its program $330,457 from
              non-Federal funds for the unsupported transactions cited in this finding.

          2C. Implement a detailed, comprehensive plan to improve the Authority’s
              management of its program funds. The plan should include the submission of
              quarterly reports to HUD detailing the Authority’s progress in improving its
              procedures and controls. The quarterly reports should address but not be
              limited to the issues cited in this finding.




                                         15
Finding 3: The Authority Did Not Properly Select Program Households
                        From Its Waiting List
The Authority did not follow HUD’s requirements and directives and its program administrative
plan regarding the selection of program households. It did not properly select all program
households from its waiting list. Instead, it admitted 146 households based on referrals. This
noncompliance occurred because the Authority disregarded HUD’s regulations and guidance and
its program administrative plan. As a result, it inappropriately paid more than $2.6 million in
housing assistance for households that were inappropriately admitted to its program.



 The Authority Did Not Select
 All Households From Its
 Waiting List

              We compared the Authority’s new admissions from May 2008 through April 2010
              with its waiting list to determine whether the households were selected from its
              program waiting list. Based on our review, the Authority did not properly select
              program households from its waiting list. Of the 346 new admissions, 93
              households were admitted based on referrals. The 93 referrals were part of two
              Authority initiatives: Howlett Initiative and O’Hare Modernization Program. We
              obtained household reports for the two initiatives and determined that an additional
              53 households were admitted before May 2008 based on referrals, for a total of 146
              households. These 146 households were admitted based on referrals instead of
              being selected from the program waiting list.

 The Authority Disregarded
 HUD’s Directives

              Based on our review of the Authority’s new admissions, it admitted 137 households
              between October 2007 and November 2009 as part of its Howlett Initiative. The
              households were not selected from the program waiting list but were referred to the
              Authority by various nonprofit organizations. The Authority made nearly $2.3 in
              housing assistance payments for the 137 households that were inappropriately
              admitted to its program.

              According to the Authority, the Howlett initiative called for providing a limited
              number of vouchers to homeless households in a coordinated effort with nonprofit
              organizations operating transitional housing programs. The Authority discussed the
              initiative with HUD and was provided guidance including how to open its waiting
              list for homeless specific households. However, the Authority did not open its
              waiting list in accordance with HUD’s regulations and guidance. Because the
              Authority did not open the waiting list as instructed by HUD, it improperly housed



                                               16
           the referred households before existing applicants on its waiting list, and excluded
           other eligible individuals or families from applying.

The Authority Received
Payment for Vouchers

           Based on our review of the Authority’s new admissions, it admitted nine households
           between April 2006 and December 2008 as part of its O’Hare Modernization
           Program agreement with the City. The households were not selected from the
           program waiting list but were referred to the Authority by the City. The Authority
           made $310,878 in housing assistance payments for the nine households that were
           inappropriately admitted its program.

           According to the agreement with the City, the Authority would provide vouchers
           to eligible low-income households that required relocation within DuPage County
           as a result of the City’s expansion of O’Hare International Airport. The Authority
           did not seek HUD approval for the O’Hare Modernization Program admissions.
           The Authority’s executive vice president stated that he did not know that the
           Authority needed to contact HUD. However, the Authority’s administrative plan
           stated that special admission procedures would be used if HUD awarded the
           Authority targeted funding and except for special admissions, applicants would be
           selected from the Authority’s waiting list.

           In accordance with the agreement with the Authority, the City provided the
           Authority with funds to pay the first 18 months of housing assistance for seven of
           the nine households. According to the Authority’s executive director, the funds
           were used to pay for the households’ housing assistance. However, there was no
           support in the household files or the Authority’s account showing that the funds
           were used to pay for the designated households’ housing assistance.

           Of the total $69,793 received from the City, the Authority provided support
           showing that $32,879 was deposited into its account; however, it was unable to
           support that the funds were used to pay housing assistance for the specified
           households. In addition, the Authority provided support showing that $19,886
           was deposited into the account for DHA Development, an Authority affiliate.
           However, the Authority was unable to provide support for the remaining $17,028
           ($69,793 minus $32,879 minus $19,886). According to the Authority’s executive
           director, the agreement specified that the Authority could keep any funds left
           over. However, the agreement stated that the Authority was responsible for
           maintaining financial records to account for the funds received and paid to each
           household.




                                             17
Conclusion


             The Authority did not properly use program funds when it accepted 146 referrals
             instead of selecting applicants from its program waiting list in accordance with
             HUD’s regulations and guidance and its program administrative plan. As a result,
             it made more than $2.6 million ($2,298,484 plus $310,878) in housing assistance
             payments for the 146 households that were not appropriately admitted to the
             Authority’s program. In addition, HUD and the Authority lacked assurance that
             the $69,793 received from the City as part of the O’Hare Modernization Program
             agreement was used to pay housing assistance for the referred households.

             In accordance with HUD’s regulations at 24 CFR (Code of Federal Regulations)
             982.152(d) on reducing public housing authority administrative fees, HUD may
             reduce or offset any administrative fee to the public housing authority, in the
             amount determined by HUD, if the public housing authority fails to perform
             public housing authority administrative responsibilities correctly or adequately
             under the program. Because the Authority did not ensure that households were
             appropriately selected, it improperly received $218,882 in administrative fees for
             the 146 households that were not selected from the Authority’s program waiting
             list.

             HUD lacked assurance that program funds were used to benefit low- and
             moderate-income individuals in accordance with HUD requirements since the
             Authority made more than $2.6 million in housing assistance payments for
             households that were not appropriately admitted to its program. In addition, HUD
             and the Authority lacked assurance that program households were selected free
             from discrimination and in accordance with HUD regulations since the Authority
             accepted referrals for the households instead of selecting them from its program
             waiting list.


Recommendations


             We recommend that the Director of HUD’s Chicago Office of Public Housing
             require the Authority to

             3A. Reimburse its program $2,828,244 ($2,609,362 in housing assistance
                 payments and $218,882 in associated administrative fees) from non-Federal
                 funds for the housing assistance payments and associated administrative fees
                 for the 146 households cited in this finding.




                                             18
3B. Provide supporting documentation or reimburse its program $69,793 from
    non-Federal funds for the O’Hare Modernization Program funds received for
    the seven households cited in this finding.

We also recommend that the Acting Director of HUD’s Chicago Office of Fair
Housing and Equal Opportunity

3C. Review the Authority’s household selections to ensure that they comply with
    HUD’s requirements. If the Authority fails to comply with HUD’s
    requirements, the Acting Director should take appropriate action against the
    Authority and/or its applicable employee(s).




                                19
                          SCOPE AND METHODOLOGY

To accomplish our objective, we reviewed

      Applicable laws, regulations, and HUD notices; HUD’s program requirements at 24 CFR
       Parts 5, 792, 943, and 982; HUD’s Guidebook 7510.1; HUD’s Handbook 1530.1, REV-5;
       HUD’s Housing Choice Voucher Guidebook 7420.10G; and HUD’s Voucher Management
       System User’s Manual, Release 5.

      The Authority’s accounting records; annual audited financial statements for 2007, 2008, and
       2009; bank statements and vendor invoices; household files; policies and procedures; board
       meeting minutes for February 2008 through February 2010; organizational chart; program
       annual contributions contract with HUD; and program administrative plan.

      HUD’s files for the Authority.

We also interviewed the Authority’s employees and HUD staff.

Finding 2

We reviewed and extracted transactions recorded in the Authority’s general ledger from July 2008
through June 2010 which appeared ineligible, misclassified, or needed additional clarification.
These transactions included all 16 credit card transactions, all 40 travel and training transactions,
and 242 other questionable transactions. The other questionable transactions included transactions
reported under accounts receivable, assets, fixed assets, current liabilities, and expenses. We
reviewed the supporting invoices, receipts, and payments for the 298 (16 plus 40 plus 242) general
ledger transactions. The 298 general ledger transactions represented 639 transactions on the
invoices and/or receipts: 102 credit card transactions, 208 travel and training transactions, and 329
other transactions.

We compared the Voucher Management System report amounts for October 2008 through May
2010 to the account totals in the Authority’s general ledger and identified any discrepancies. To
obtain the general ledger totals, we sorted the ledger by month and account identification number
and then totaled the transaction amounts by the account identification number.

We compared the net restricted assets reported through HUD’s Voucher Management System with
net restricted assets based on the account totals in the Authority’s general ledger. To calculate the
monthly net restricted assets from the general ledger, we totaled the housing assistance payment
revenues and subtracted the housing assistance payment expenses and then added the resulting
surplus or deficit to the previous month’s net restricted assets. We used the June 2009 net restricted
assets, which were agreed upon by HUD and the Authority, as a baseline for our calculation. In
addition, we compared the Authority’s calculation of net restricted assets to the cash and investment
account totals in its general ledger.




                                                  20
Finding 3

We compared the list of new admissions to the Authority’s program waiting list, list of portability
households, and lists of special admission households. We initially determined that 93 of the 346
new admissions from May 2008 through April 2010 were based on referrals from two Authority
initiatives. We obtained household reports for the two initiatives and determined that an additional
53 households were admitted before May 2008 based on referrals. In addition, we reviewed the
files for the households admitted as part of the Authority’s O’Hare Modernization Program to
determine the funds received from the City for each household.

We obtained the Authority’s housing assistance payments register to determine the total housing
assistance paid for the 146 households inappropriately admitted to its program. We totaled the
housing assistance by household from the date of admission through October 2010.

We performed our onsite audit work between June 2010 and November 2010 at the Authority’s
office located at 711 East Roosevelt Road, Wheaton, IL. The audit covered the period May 1,
2008, through April 30, 2010, but was expanded as determined necessary.

We relied in part on data maintained by the Authority in its systems. Although we did not
perform a detailed assessment of the reliability of the data, we performed a minimal level of
testing and found the data to be adequately reliable for our purposes.

We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                                 21
                              INTERNAL CONTROLS

Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

      Effectiveness and efficiency of operations,
      Reliability of financial reporting, and
      Compliance with applicable laws and regulations.

Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program operations as well as the
systems for measuring, reporting, and monitoring program performance.



 Relevant Internal Controls

               We determined that the following internal controls were relevant to our audit
               objective:

                     Effectiveness and efficiency of operations – Policies and procedures that the
                      audited entity has implemented to provide reasonable assurance that a
                      program meets its objectives, while considering cost effectiveness and
                      efficiency.

                     Reliability of financial reporting – Policies and procedures that management
                      has implemented to provide reasonable assurance regarding the reliability of
                      financial reporting and the preparation of financial statements in accordance
                      with generally accepted accounting principles.

                     Compliance with applicable laws and regulations – Policies and procedures
                      that management has implemented to reasonably ensure that resource use is
                      consistent with laws and regulations.

               We assessed the relevant controls identified above.

               A deficiency in internal control exists when the design or operation of a control does
               not allow management or employees, in the normal course of performing their
               assigned functions, the reasonable opportunity to prevent, detect, or correct (1)
               impairments to effectiveness or efficiency of operations, (2) misstatements in
               financial or performance information, or (3) violations of laws and regulations on a
               timely basis.



                                                 22
Significant Deficiencies

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

                   The Authority substantially lacked adequate procedures and controls to
                    ensure that it properly managed its program operations (see findings 1, 2,
                    and 3).

                   The Authority lacked procedures and controls to ensure that program funds
                    were appropriately used for program-related activities in accordance with
                    HUD’s requirements (see finding 2).

                   The Authority lacked adequate procedures and controls to ensure that
                    households were selected from its program waiting list in accordance with
                    HUD’s requirements and its program administrative plan (see finding 3).

Separate Communication of a
Minor Deficiency

             We informed the Authority’s executive director and the Director of HUD’s
             Chicago Office of Public Housing of a minor deficiency through a memorandum,
             dated March 22, 2011.




                                              23
                                   APPENDIXES

Appendix A

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

                  Recommendation             Ineligible 1/   Unsupported
                         number                                       2/
                         2A                   $2,303,853
                         2B                                      $330,457
                         3A                    2,828,244
                         3B                                        69,793
                        Totals                $5,132,097         $400,250


1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
     that the auditor believes are not allowable by law; contract; or Federal, State, or local
     policies or regulations.

2/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures.




                                             24
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION

Ref to OIG Evaluation   Auditee Comments




                         25
Ref to OIG Evaluation   Auditee Comments




                         26
Ref to OIG Evaluation   Auditee Comments




Comment 1

Comment 2




Comment 3




                         27
Ref to OIG Evaluation   Auditee Comments




Comment 4


Comment 5



Comment 6




Comment 7




Comment 8




                         28
Ref to OIG Evaluation   Auditee Comments




Comment 9

Comment 10




Comment 11




Comment 12




                         29
Ref to OIG Evaluation   Auditee Comments




                         30
Ref to OIG Evaluation   Auditee Comments




Comment 13


Comment 14
Comment 15



Comment 16




                         31
Ref to OIG Evaluation   Auditee Comments




Comment 19




                         32
Ref to OIG Evaluation   Auditee Comments




Comment 18




Comment 19




Comment 20




                         33
Ref to OIG Evaluation   Auditee Comments




Comment 21




                         34
                           OIG Evaluation of Auditee Comments

Comment 1     The responses to the previous audit reports were included in their entirety on audit
              report #2009-CH-1016, issued on September 28, 2009, and audit report #2010-
              CH-1008, issued on June 15, 2010.

Comment 2     The supporting documentation provided was reviewed and changes were made to
              the report as appropriate.

Comment 3     The findings in this section were cited to illustrate a pattern of ineffective
              program management. There was no repeat of the recommendations from HUD’s
              review or the previous two audit reports.

Comment 4     Based on the supporting documentation provided by the Authority, the correct
              figures are $2,303,853 (unallowable) and $330,457 (questionable).

Comment 5     Any ineligible funds cited in this finding will be reduced when the Authority
              provides support for the repayment.

Comment 6     The Authority used $1,791 in program funds for eight National Association for
              the Exchange of Industrial Resources purchases made in September 2008 and
              from February through June 2010.

Comment 7     We estimate that the Authority’s estimated savings of 200,000 pieces of paper last
              year means the Authority typically provided each of its seven board
              commissioners with over 7,000 pieces of paper at each quarterly meeting
              (200,000 pieces of paper divided by 7 commissioners divided by 4 meetings
              annually); 7,000 pieces of paper is equivalent to a 28-inch stack.

Comment 8     The supporting documentation provided by the Authority was reviewed and
              changes were made to the report as appropriate.

Comment 9     The $10,656 refers to 13 expense transactions made from July 2008 through
              January 2009.

Comment 10 HUD’s requirements state that administrative fees may never be loaned to another
           program, regardless of whether the Authority intends to reimburse the program at
           a later date. Instead, the Authority must use program receipts to provide decent,
           safe, and sanitary housing for eligible families.

Comment 11 As cited in the finding, the Authority provided credit cards to two additional staff
           members not listed in its policy.


Comment 12 As cited in our finding, the Authority failed to implement controls to ensure that
           HUD’s and its requirements were appropriately followed. The ineligible travel



                                               35
              expenses were reimbursed although they were listed as nonqualified expenses in
              the Authority’s travel policy.

Comment 13 As cited in the finding, the Authority discussed the initiative with HUD and was
           provided guidance including how to open its waiting list for specific households.
           The Authority and its board did not ensure that the waiting list was opened in
           accordance with HUD’s directive.

Comment 14 The Authority was not accepting names to its waiting list because it failed to open
           the list in accordance with HUD’s directives.

Comment 15 The Authority began accepting referrals for its Howlett Initiative in October 2007.
           As of October 2008, the Authority had 324 households on its waiting list.

Comment 16 As cited in the finding, the Authority did not seek HUD approval for the O’Hare
           Modernization Program admissions. In addition, although the City of Chicago
           provided the Authority with funds to pay for the first 18 months of housing
           assistance for seven of the nine households, the Authority was unable to provide
           support that the funds were used to pay for the designated households’ housing
           assistance.

Comment 17 As cited in the finding, the households were provided housing choice vouchers
           based on referrals rather than selection from the program waiting list. In addition,
           there was no support that the funds were used to pay for the designated
           households’ housing assistance.

Comment 18 HUD’s guidance regarding the Howlett Initiative stated that the Authority could
           not require the households to remain on the referring agency’s housing programs.
           They advised that vouchers may only be terminated for violating family
           obligations listed in the program regulations.

Comment 19 The guidance provided to the Authority from HUD included a statement that the
           Authority may open its waiting list for specific families. However, the Authority
           did not open its waiting list in accordance with the guidance.

Comment 20 The board minutes state that preference points will be given to in transition or
           homeless households on the waiting list. However, the Authority failed to open
           the waiting list with preferences as stated in the minutes.

Comment 21 Based on the documents provided by the Authority, 14 households were referred
           to that Authority as part of the Howlett Initiative from April through August 2009.




                                              36
Appendix C

      FEDERAL REQUIREMENTS AND THE AUTHORITY’S
            PROGRAM ADMINISTRATIVE PLAN

Finding 1

Federal regulations at 2 CFR 180.700 state that the suspending official may impose suspension
only when the official determines that (b) there exists adequate evidence to suspect any other
cause for debarment listed under 180.800 and (c) immediate action is necessary to protect the
public interest.

Federal regulations at 2 CFR 180.800 state that a Federal agency may debar a person for (b)
violation of the terms of a public agreement or transaction so serious as to affect the integrity of
an agency program, such as

   (1) A willful failure to perform in accordance with the terms of one or more public
       agreements or transactions,
   (2) A history of failure to perform or of unsatisfactory performance of one or more public
       agreements or transactions, or
   (3) A willful violation of a statutory or regulatory provision or requirement applicable to a
       public agreement or transaction.

Federal regulations at 2 CFR 2424.10 state that HUD adopted, as HUD policies, procedures, and
requirements for nonprocurement debarment and suspension, the Federal guidance in 2 CFR Part
180.

HUD’s regulations at 24 CFR 24.1 state that the policies, procedures, and requirements for
debarment, suspension, and limited denial of participation are set forth in 2 CFR 2424.

Finding 2

HUD’s regulations at 24 CFR 982.152(a)(3) state that the housing authority’s administrative fees
may only be used to cover costs incurred to perform housing authority administrative
responsibilities for the program in accordance with HUD regulations and requirements.

HUD’s regulations at 24 CFR 982.153 state that the public housing authority must comply with
the consolidated annual contributions contract, the application, HUD regulations and other
requirements, and the public housing authority’s administrative plan.

HUD’s regulations at 24 CFR 982.158(a) state that the public housing authority must maintain
complete and accurate accounts and other records for the program in accordance with HUD
requirements in a manner that permits a speedy and effective audit.




                                                 37
HUD’s Public and Indian Housing Notice 2004-7 states that administrative fees shall only be
used for activities related to the provision of Section 8 rental assistance, including related
development activities. Any administrative fees that are later moved into the administrative fee
reserve account at year end may not be used for “other housing purposes permitted by state and
local law,” and must only be used for the provision of Section 8 rental assistance, including
related development activity.

HUD’s Public and Indian Housing Notice 2010-7 states that program administrative fees may
never be loaned to another program to cover ineligible expenses, regardless of whether the public
housing authority intends to reimburse the program at a later date.

HUD’s Public and Indian Housing Notice 2010-16 states that the public housing authority is
responsible for operating its program within the amount of funding provided.

HUD’s Public and Indian Housing Notice 2010-16 states that HUD’s formula for calculating the
net restricted assets is the total of

   (1) Net restricted asset balance as of the end of the most recent public housing authority
       fiscal year end, plus
   (2) Housing assistance payment funding received since the most recent public housing
       authority fiscal year end through the last day of the month being reported, plus
   (3) All interest earned, fraud recovery portions, and Family Self-Sufficiency program
       forfeitures since the most recent public housing authority fiscal year end through the last
       day of the month being reported, minus
   (4) Housing assistance payment expenses incurred since the most recent public housing
       authority fiscal year end through the last day of the month being reported.

Section 11 of the Authority’s annual contributions contract with HUD states that (a) the housing
authority must use program receipts to provide decent, safe, and sanitary housing for eligible
families in compliance with the U.S. Housing Act of 1937 and HUD requirements. Program
receipts may only be used to pay program expenditures, (b) the housing authority must not make
any program expenditures except in accordance with HUD-approved budget estimates and
supporting data for the program, and (c) interest on the investment of program receipts
constitutes program receipts.

Section 14, part A of the Authority’s annual contributions contract with HUD states that the
housing authority must maintain complete and accurate books of account and records for the
program. The books and records must be in accordance with HUD requirements and must
permit a speedy and effective audit.

HUD’s Voucher Management System User Manual, Release 5, appendix A, states that the
Authority should report the interest or other income earned during the month from the
investment of housing assistance payment funds and net restricted assets.

HUD’s Voucher Management System User Manual, Release 5, appendix A, states that the
Authority should report the total dollar amount recouped as fraud recoveries during the month



                                                38
that accrues to the net restricted assets account. This amount consists of the lesser of one-half
the amount recovered or the total recovery minus the costs incurred by the public housing
authority in the recovery.

HUD’s Voucher Management System User Manual, Release 5, appendix A, states that the
Authority should report the total amount billed for the public housing authority’s independent
public accountant audit if incurred during the reporting cycle, excluding the accounting service
fee. It should report this amount only in the month during which it occurred.

HUD’s Voucher Management System User Manual, Release 5, appendix A, states that total
housing assistance payment revenue is defined as total funding eligibility for calendar years 2005
and later minus any offsets for 2008 and 2009 and should equal the amount actually disbursed to
the public housing authority. The amount reported must include all interest earned, fraud
recovery portions, and Family Self-Sufficiency program forfeitures.

HUD’s Voucher Management System User Manual, Release 5, appendix A, states that
cash/investments as of the last day of the month are the total amount of housing assistance
payments and administrative fee cash and investments for the program. Amounts reported
include all cash and investments as they relate to net restricted assets and unrestricted net assets
balances as of the last public housing authority fiscal year end, as well as any additional funds
that may have been reported in the unrestricted net assets and net restricted assets fields through
the month being reported. This total amount must include only those housing assistance
payment and administrative fee funds (including any interest or revenue derived) received for the
program, including interest earned, fraud recovered, and Family Self-Sufficiency program
forfeitures.

Internal Revenue Service Publication 15-B, section 1, states that if the recipient of a taxable
fringe benefit is your employee, the benefit is subject to employment taxes and must be reported
on Form W-2.

Internal Revenue Service Publication 15-B, section 4, states that for employment tax and
withholding purposes, you can treat fringe benefits (including personal use of employer-provided
highway motor vehicles) as paid on a pay period, quarterly, semiannual, annual, or other basis.
But the benefits must be treated as paid no less frequently than annually.

Item 1 of the Authority’s credit card policy states that only the following individuals are
empowered to have credit cards: executive director, chief financial officer, and director of
development.

Item 5 of the Authority’s credit card policy states that only budget-approved items are allowed to
be charged.

Item 7 of the Authority’s credit card policy states that each cardholder assembles the invoices for
payment and the invoices are submitted to the executive director/chief financial officer for initial
approval and final approval.




                                                 39
Item 8 of the Authority’s credit card policy states that the chief financial officer checks the
invoices for proper classification and appropriateness.

Item 5 of the Authority’s travel policy states that the expenses of a spouse or family traveling
with an employee are nonqualified.

Finding 3

HUD’s regulations at 24 CFR 982.152(d) state that HUD may reduce or offset any
administrative fee to the authority, in the amount determined by HUD, if the authority fails to
perform authority administrative responsibilities correctly or adequately under the program.

HUD’s regulations at 24 CFR 982.203(a) state that if HUD awards a public housing authority
program funding that is targeted for families living in specified units, (1) the public housing
authority must use the assistance for the families living in these units. (2) The public housing
authority may admit a family that is not on the public housing authority waiting list or without
considering the family’s waiting list position. The public housing authority must maintain
records showing that the family was admitted with HUD-targeted assistance.

HUD’s regulations at 24 CFR 982.204(a) state that except for special admissions, participants
must be selected from the public housing authority waiting list.

HUD’s regulations at 24 CFR 982.206(a)(1) state that when the public housing authority opens a
waiting list, the public housing authority must give public notice that families may apply for
tenant-based assistance. The public notice must state where and when to apply. (2) The public
housing authority must give the public notice of publication in a local newspaper of general
circulation and also by minority media and other suitable means. The notice must comply with
HUD fair housing requirements. (3) The public notice must state any limitations on who may
apply for available slots in the program.

Chapter 4, the Special Admissions section of the Authority’s administrative plan, states that if
HUD awards the Authority program funding that is targeted for specifically named families, the
Authority will admit these families under a special admission procedure.

Chapter 4, the Waiting List section of the Authority’s administrative plan, states that except for
special admissions, applicants will be selected from the Authority’s waiting list.




                                                 40