oversight

The Hawthorne Housing Authority Failed To Maintain an Adequate Financial Management System

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-03-28.

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

                                                                 Issue Date
                                                                         March 28, 2011
                                                                 Audit Report Number
                                                                          2011-LA-1008




TO:         K.J. Brockington, Director, Los Angeles Office of Public Housing , 9DPH


FROM:       Tanya E. Schulze, Regional Inspector General for Audit, Region IX, 9DGA

SUBJECT: The Hawthorne Housing Authority Failed To Maintain an Adequate Financial
         Management System

                                    HIGHLIGHTS

 What We Audited and Why

      We completed a review of the Hawthorne Housing Authority’s (Authority) Section 8
      program. We performed the audit based on a recommendation from the Los Angeles
      U.S. Department of Housing and Urban Development (HUD) Office of Public Housing
      indicating missing and/or inadequate financial records. In addition, Section 8 reviews are
      a part of the Office of the Inspector General’s (OIG) annual audit plan.

      Our objective was to determine whether the Authority used Section 8 Housing Choice
      Voucher program funds in accordance with HUD rules and regulations. Specifically, we
      wanted to determine whether the Authority’s financial management system was adequate
      and Section 8 transfers into the City of Hawthorne’s (City) general fund were recorded
      and expended according to HUD rules and regulations.


 What We Found

      The Authority and City failed to maintain an adequate financial management system to
      properly administer their Section 8 Housing Choice Voucher program according to HUD
      rules and regulations. Specifically, the Authority did not properly document more than
      $1.4 million in Section 8 investment and interfund activity, making the expended funds
     ineligible. Additionally, the Authority accumulated Section 8 deficits due partly to the
     City’s failure to record portability receivables in its accounting system. Lastly, the
     Authority and City failed to implement adequate internal controls to safeguard and
     minimize the risk of operating a Section 8 program.


What We Recommend

     We recommend that the Director of the Los Angeles Office of Public Housing require the
     City repay more than $1.4 million in ineligible expenditures of Section 8 funds and
     implement adequate policies and procedures over its accounting for interfund activities
     and portability receivables. In addition, the Director should consider sanctions against
     the City for not complying with its Annual Contributions Contract.

     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 February 18, 2011, and held an
     exit conference with Authority and City officials on March 7, 2011. The Authority
     provided written comments in two separate responses on March 9 and March 10, 2011,
     and generally disagreed with our findings.

     The complete text of the auditee’s response, along with our evaluations of that response,
     can be found in appendix A of this report.




                                              2
                           TABLE OF CONTENTS

Background and Objective                                                          4

Results of Audit
   Finding: The Authority and City Failed To Maintain an Adequate Financial       6
            Management System To Properly Track, Maintain, and Expend Section 8
            Housing Choice Voucher Program Funds

Scope and Methodology                                                             10

Internal Controls                                                                 12

Appendixes

      A.     Schedule of Questioned Costs and Funds To Be Put to Better Use       14
      B.     Auditee Comments and OIG’s Evaluation                                15
      C.     Criteria                                                             21




                                            3
                      BACKGROUND AND OBJECTIVE

The Housing Choice Voucher program was created under the Housing and Urban Rural
Recovery Act of 1983 to enable eligible lower income families to obtain modest housing in the
private sector that is decent, safe, and sanitary. The U.S. Department of Housing and Urban
Development (HUD) provides the rental subsidy to the landlords through public housing
agencies.

Hawthorne Housing Authority

The City of Hawthorne (City) operates the Hawthorne Housing Authority (Authority) as part of
the City’s housing department, located at 4455 West 126th Street, Hawthorne, CA. The purpose
of the Authority is to administer the Section 8 Housing Choice Voucher program, which
provides rental subsidies to very low- and low-income families. The Authority operates its
Section 8 program in three segments: administration, regular housing assistance payments, and
portable housing assistance payments. It is responsible for tracking, maintaining, safeguarding,
and documenting all revenues, expenditures, transfers, and financial details stemming from the
use of Section 8 funds. The City’s accounting department handles all the fiscal operations of the
Authority’s Section 8 program, including receivables, payables, deposits, journal entries,
tracking fund and cash balances, and fund maintenance. The Authority has a baseline allocation
of 711 Section 8 vouchers. As of June 30, 2010, the Authority had 638 vouchers leased and had
received more than $4.9 million for its 2010 housing assistance payments.

Portability

Aside from regular housing assistance, the Authority annually receives a large number of porting
vouchers from outside authorities. An eligible family may use a tenant-based voucher to lease a
unit anywhere in the United States, leaving the first (initial) public housing agency that issued
the voucher for the second (receiving) public housing agency. The receiving public housing
agency has the option of administering the subsidy for the initial public housing agency or
absorbing the portable family into its own Housing Choice Voucher program. If the receiving
public housing agency decides to administer the porting family’s subsidy, the housing assistance
comes from the initial public housing agency’s program allocation. The receiving public
housing agency bills the initial public housing agency for the full housing assistance payment
and an administrative fee. As of June 30, 2010, the Authority had 518 vouchers leased and had
received more than $4.5 million for its 2010 portable housing assistance payments from outside
authorities. On average, the Authority pays monthly housing assistance to other public housing
agencies for 20 port-out tenants.

Our Objective

Our objective was to determine whether the Authority used Section 8 Housing Choice Voucher
program funds in accordance with HUD rules and regulations. Specifically, we wanted to
determine whether the Authority’s financial management system was adequate and Section 8



                                                4
transfers into the City’s general fund were recorded and expended according to HUD rules and
regulations.




                                              5
                                RESULTS OF AUDIT

Finding: The Authority and City Failed To Maintain an Adequate
         Financial Management System To Properly Track, Maintain,
         and Expend Section 8 Housing Choice Voucher Program
         Funds

The Authority and City failed to maintain an adequate financial management system to properly
execute their Section 8 program according to HUD rules and regulations. We attribute these
deficiencies to the Authority’s and City’s lack of procedures and controls for the Section 8
program and their disregard for HUD rules and regulations. As a result, the Authority could not
provide assurance that more than $1.2 million in Section 8 investment funds and $200,000 in
Section 8 port Housing Choice Voucher program funds were not used for ineligible
costs/activities. Additionally, the Authority could not demonstrate that all port funds were
tracked and collected on a timely basis.



 Ineligible Transfer of Section 8
 Investment Funds

       The Authority failed to adequately track, record, and document the transfer and
       expenditure of more than $1.2 million from a Section 8 investment account. In
       December 2005, the Authority held more than $1.2 million in Section 8 investment funds
       with the State of California’s Local Agency Investment Fund. The fund was liquidated in
       four separate withdrawals and transferred into the City’s general fund account. The
       decision to liquidate and close the Section 8 investment account was made by the former
       city manager acting as both the city manager and finance director and without notifying
       the Authority. In addition, there were no approvals or correspondence approving such a
       large transfer, journal entries recording the transfer ensuring that funds were not
       comingled, or details of how the funds were expended. The City was only able to
       provide investment bank statements and master account bank statements showing
       balances and deposits. After issuance of a subpoena on October 28, 2010, and subpoena
       compliance letter on December 3, 2010, the City responded on December 30, 2010,
       certifying that all documents pertaining to our review had been provided to us.
       Ultimately, the Authority was not able to provide adequate financial records detailing the
       makeup of more than $1.2 million in Section 8 funds held in investment and the
       subsequent transfer and expenditure of the funds into the City’s general master account.
       Therefore, we determined that more than $1.2 million was ineligible.




                                               6
                                  Withdrawal         Withdrawal         Ending
                                     date             amount 1          balance
                                   12/06/05         $ (1,000,000)      $ 269,107
                                   10/23/06             (287,558)               -
                                   05/31/07                 (889)               -
                                   12/27/07                   (8)               -

           The Authority disregarded HUD requirements for maintaining adequate financial records
           to support all Section 8 activity. Although the Authority is responsible for operation and
           administration of the Section 8 program, the City’s finance department maintains and
           accounts for the program funds. However, we identified a serious disconnect between
           the finance and housing departments. The City and Authority utilize different computer
           data systems that do not collaborate or share information, and the Authority had no other
           procedures or controls in place to ensure it was aware of how the City was maintaining
           the program funds and that transactions were properly authorized. The City’s ability to
           manipulate Section 8 funds without adequate communication and/or approval from the
           Authority represents a serious lack of internal controls.

    Ineligible Interfund Transfer of
    Section 8 Portability Funds

           The Authority made an ineligible transfer of $200,000 in Section 8 portability funds to
           the City’s general fund. In fiscal year 2007, the Authority borrowed $650,000 from the
           City’s general fund, split between Section 8 administration ($65,000) and Section 8
           portables ($585,000), to cover Section 8 cash deficits. Although the City provided
           journal entries showing the transfer of funds into the Section 8 administration and
           portables account, it did not record a payable in the general ledger. In addition, the
           Authority did not maintain sufficient detail to show what expenditures were covered with
           the $650,000 transfer. The Authority repaid $200,000 of the prior years’ deficits in fiscal
           year 2008 from the Section 8 portables cash account. As stated in PIH (Office of Public
           and Indian Housing) Notices 2007-14 and 2008-15, the use of Section 8 funds to cover
           prior years’ deficits is not allowable. Therefore, we determined that the $200,000 paid
           into the general fund account was ineligible. The remaining $450,000 owed to the
           general fund would also become ineligible if repaid with Section 8 funds. As above, this
           occurred due to a general disregard for HUD requirements and a lack of procedures and
           controls to ensure proper coordination between the Authority and the City’s finance
           department.




1
    The differences between amounts withdrawn and prior ending balances were due to accumulated interest deposits.


                                                          7
Receivables Not Properly
Recorded


     The City did not properly track receivables stemming from the billing and receipt of
     Section 8 portability vouchers. It did not reconcile whether all Section 8 funds due from
     HUD and porting entities had been received. While the Authority was responsible for
     receiving port payments, the City was responsible for entering the payments into the
     accounting system, including ensuring that receivables were properly recorded when full
     payment was not received. When funds were not received in full, receivables should
     have been recorded to balance the general ledger and ensure that fund and cash balances
     were as accurate as possible; however, these entries were not made.

     In a letter, dated December 2005, the former city manager admitted to the City’s lack of
     receivable accounting stating, “Presently we have nothing to indicate which Housing
     Authority owes us this money (port funds) and thus no means of collecting this sum.”
     The Authority accumulated Section 8 cash deficits in fiscal years 2006 and 2007 and
     accumulated Section 8 fund deficits in fiscal years 2009 and 2010. We believe the
     deficits were partly caused by the City’s failure to record receivables due from ports and
     from HUD housing assistance payments. While the Authority had the ability in its
     HAPPY software to track receivables, this information was not relayed to the City’s
     finance department and was not entered into the City’s general ledger accounting system.
     A lack of communication between to the two departments and lack of policies and
     procedures led to the weakened control environment, allowing poor accounting practices.

Conclusion

     We attribute the deficiencies described above to the Authority’s and City’s disregard for
     HUD rules and regulations and lack of procedures and controls for the entire Section 8
     Housing Choice Voucher program. Overall, we witnessed a poor control environment
     with a weak management attitude toward ensuring controls were in place and followed.
     Specifically, the Authority and City failed to maintain an adequate financial management
     system to properly execute their Section 8 program according to HUD rules and
     regulations. As a result, the Authority could not provide assurance that more than $1.2
     million in Section 8 investment funds and $200,000 in Section 8 port Housing Choice
     Voucher program funds were not used for ineligible costs/activities. Additionally, the
     Authority could not provide assurance that all port funds were tracked and collected on a
     timely basis. Ultimately, the lack of procedures and controls put the Authority’s Section
     8 program at increased risk of waste, fraud, and abuse.




                                             8
Recommendations

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

    1A.    Require the City to repay the Section 8 program $1,288,455 for the ineligible
           expenditure of Section 8 investment funds from non-Federal funds.

    1B.    Require the City to repay the Section 8 program $200,000 for the ineligible
           expenditure of Section 8 housing assistance portability funds from non-Federal
           funds

    1C.    Require the Authority not to repay the remaining $450,000 transferred from the
           general fund to the Section 8 program, as the remaining balance would also be
           considered ineligible if paid back with Section 8 funds.

    1D.    Require the Authority to reconcile portability receivables for fiscal years 2005
           through 2011, and seek repayment for outstanding receivables. The outstanding
           amounts not previously recorded by the Authority would be considered funds to
           be put to better use.

    1E.    Require the Authority to implement policies procedures to ensure portability
           receivables are tracked and recorded in coordination with the City’s accounting
           system in accordance with PIH Notice 2008-43.

    1F.    Require the Authority to establish and implement policies and procedures
           covering the fiscal administration of the Section 8 program.

    1G.    Consider implementing administrative sanctions (i.e., repayment of administrative
           fees) against the Authority in accordance with 24 CFR 982.152(d) and Section 6
           of the Annual Contributions Contract, for failing to comply with its annual
           contributions contract regarding financial management and maintaining adequate
           financial records.




                                            9
                        SCOPE AND METHODOLOGY

We performed our onsite audit work at the Authority, located in Hawthorne, CA, between June
and November 2010. Our audit generally covered the period July 1, 2005, through June 30,
2010. We expanded our scope as necessary.

To accomplish our objective, we

       Reviewed applicable HUD regulations, including the Housing Act of 1937, 24 CFR
       (Code of Federal Regulations) Parts 982, 5, and 985; the Housing Choice Voucher
       Guidebook 74210.10G; HUD Handbook 7510.1G; and PIH Notices 2007-14, 2008-15,
       and 2008-43.

       Reviewed the Authority’s annual contributions contract, administrative plan, and cost
       allocation plan.

       Reviewed the City’s accounting policies and procedures.

       Interviewed Authority and City management and staff to determine their job
       responsibilities, Section 8 processes, and control processes and discussed audit-related
       topics.

       Interviewed the independent auditor responsible for the Authority’s annual audits.

       Reviewed records maintained by HUD pertaining to the Authority.

       Reviewed the Authority’s financial audit reports for fiscal years 2006, 2007, 2008, and
       2009, as well as its staff listing and organizational chart.

       Reviewed Section 8 investment bank statements and City master account bank
       statements.

       Reviewed detailed accounting records maintained by the Authority and City pertaining to
       Section 8 interfund transfers, receivables, and Section 8 payments and receipts.

We assessed the reliability of the data provided by the City and Authority. We determined that
the Section 8 data provided by the City and Authority is sufficiently reliable, given the audit
objectives and intended use of the data. The assessment was conducted on Section 8
investments, interfund transfers, and housing assistance receipts and expenditures. Our
assessment included testing journal entries, matching Section 8 expenditures and receipts to
general ledger entries, and reconciling bank statements with investment statements. We did note
however, the Authority and City do not have adequate policies and procedures for fiscal and
program management of the Section 8 program.




                                               10
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.




                                              11
                              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 plans, 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 objectives:

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

                 Reliability of financial reporting – Policies and procedures that the audited
                 entity has implemented to reasonably ensure that all financial data,
                 transactions, and reports are accurate and recorded appropriately and in a
                 timely manner.

                 Compliance with applicable laws and regulations – Policies and procedures that
                 the audited entity 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 exits 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.




                                                12
Significant Deficiency


     Based on our review, we believe that the following item is a significant deficiency:

              The Authority did not have policies and procedures in place to ensure that
              Section 8 transfers and receivables were tracked, maintained, safeguarded, and
              expended according to HUD rules and regulations.




                                              13
                                        APPENDIXES

Appendix A

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

                     Recommendation             Ineligible 1/    Funds to be put
                         number                                  to better use 2/

                            1A                   $1,288,455
                            1B                     $200,000
                            1C                                         $450,000
                           Total                 $1,488,455            $450,000


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. These costs consist of Section 8 funds transferred out of the Authority’s Section 8
program without adequate tracking, documentation, and safeguarding.

2/ Recommendations that funds be put to better use are estimates of amounts that could be used
more efficiently if an OIG recommendation is implemented. These amounts include reductions
in outlays, deobligation of funds, withdrawal of interest, costs not incurred by implementing
recommended improvements, avoidance of unnecessary expenditures noted in preaward reviews,
and any other savings that are specifically identified. In this instance, if the Authority
implements our recommendations, it will not repay the City’s general fund account with Section
8 funds for a prior interfund transfer, resulting in the Authority’s being able to use those funds
for other Section 8 needs.




                                                 14
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




Comment 2




                         15
Comment 3




            16
Comment 4




Comment 5




            17
Comment 1




Comment 2




            Additional exhibit made available upon request




                                           18
                         OIG Evaluation of Auditee Comments

Comment 1   The OIG recognizes the Authority has taken steps to remedy weaknesses
            identified during our audit. As discussed during the exit conference, the audit
            resolution process will provide the Authority ample opportunity to present
            corrective actions for each recommendation to HUD.

Comment 2   The recommendation for HUD to consider administrative sanctions against the
            Authority remains unchanged. The recommendation illustrates the significance of
            the Authority’s deficiencies in maintaining a financial management system that
            tracked, maintained, and safeguarded Section 8 program funds. The control
            environment did not ensure Section 8 program funds were used according to HUD
            rules and regulations. As such, we find it appropriate for HUD to consider
            administrative sanctions.

Comment 3   We disagree with the City’s assessment that the investment account funds were
            not Section 8 funds. During the audit, the Authority stated the funds held in the
            investment account consisted of Section 8 reserves accumulated prior to
            December 2005. The City has never presented any documentation showing the
            funds held in the Authority’s investment account did not originate from Section 8
            activities. In December of 2005, the City maintained three separate Local Agency
            Investment Fund (LAIF) accounts with the State of California, see table below.
            The City maintained distinct and separate investment funds for the City and
            redevelopment agency.

                                                                     Account        Ending
                               Account name
                                                                     number         balance
                     Hawthorne Housing Authority                    25-xx-xxx     $   269,107
                          City of Hawthorne                         98-xx-xxx     $ 6,160,941
              Hawthorne Community Redevelopment Agency              65-xx-xxx     $    62,546

            The City is incorrect in its assertion that we did not respond to the letter from the
            former interim Finance Director dated October 26, 2010. In a meeting with the
            former interim Finance Director on November 4, 2010, we discussed the matter
            and informed the City that it must provide documentation supporting its claims
            that the Authority’s investment fund did not contain any Section 8 funds. We
            then issued a draft finding outline to the City and Authority on January 20, 2011.

            The attachments provided by the City in its response and its earlier response dated
            October 26, 2010 do not adequately support their claims. The spreadsheets only
            show cash and fund deficits. The City also stated that during fiscal years from
            July 1, 2005 through June 30, 2010, the City’s expenditures on Section 8
            exceeded the amount of HUD assistance. However, The City’s financial records
            showed that in fiscal years ending June 30, 2006 through June 20, 2008, the
            Authority’s Section 8 revenue exceeded the Authority’s expenditures for the



                                              19
            program by more than $2.9 million, which included the period in which the LAIF
            account funds were liquidated.

            In summary, the City was unable to provide any supporting documentation and
            certified in a subpoena response dated December 30, 2010 that any and all records
            pertaining to our review have been provided. Therefore, the finding and
            recommendation remain unchanged and the $1,288,455 transferred out of the
            Authority’s investment fund account is still considered ineligible.

Comment 4   We disagree with the City’s assertion that the audit report does not question the
            $650,000. The report clearly states the Authority was unable to provide
            supporting documents showing what expenditures the $650,000 represented.
            Expenditures merely identified as being applicable to the Section 8 program but
            without supporting documents are considered ineligible. Again, the City certified
            in response to our subpoena that all documents were provided. Absent supporting
            documents, the $200,000 repaid is considered ineligible and the $450,000
            outstanding would be considered ineligible if repaid.

Comment 5   We disagree with the City’s assessment that the notices cited in the report are not
            applicable. The initial $650,000 was transferred to the Section 8 program in four
            transfers, $325,000 transferred on December 31, 2006 and $325,000 transferred
            on March 31, 2007. While the transfers occurred prior to issuance of PIH Notice
            2007-14, the repayment occurred in four installments starting on September 30,
            2007, after issuance of the Notice in question. The repayment to the City’s
            general fund used Section 8 funds and therefore violated the provision that
            Section 8 funds not be used to pay for prior years deficits. Therefore, the finding
            and recommendation remain unchanged.

            Additionally, HUD has placed an increased significance on housing authorities
            taking steps to ensure their Section 8 programs operate within budget. Public
            Housing Notice 04-7, section 9, states that the ACC reserve must now cover only
            those housing assistance payment (HAP) costs that exceed Annual Budget
            Authority available for HAPs in the current fiscal year. Public Housing Notice
            05-1, section 9(C), states authorities must manage their programs in a prudent
            manner to enable them to serve families within their calendar year 2005 budget
            and voucher baseline, and that authorities should review their policies and
            operations to ensure they are not incurring HAP costs beyond what is needed to
            support decent housing of a modest nature within market rents for participants.




                                             20
Appendix C

                                        CRITERIA
24 CFR 982.158. Program accounts and records.
   a. The PHA [public housing agency] 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.
   b. The PHA must furnish to HUD accounts and other records, reports, documents and
      information, as required by HUD.
   c. HUD and the Comptroller General of the United States shall have full and free access to
      all PHA offices and facilities, and to all accounts and other records of the PHA that are
      pertinent to administration of the program, including the right to examine or audit the
      records, and to make copies. The PHA must grant such access to computerized or other
      electronic records, and to any computers, equipment or facilities containing such records,
      and shall provide any information or assistance needed to access the records.

24 CFR 982.152(d). Reducing PHA administrative fee.
HUD may reduce or offset any administrative fee to the PHA, in the amount determined by
HUD, if the PHA fails to perform PHA administrative responsibilities correctly or adequately
under the program (for example, PHA failure to enforce HQS [housing quality standards]
requirements; or to reimburse a receiving PHA promptly under portability procedures).

Annual Contributions Contract (October 23, 1997), Section 6.
  a. If HUD determines that the HA [housing authority] has failed to comply with any
     obligations under the consolidated ACC [annual contributions contract], HUD may
     reduce the amount determined by HUD:
         1. The amount of the HUD payment for any funding increment.
         2. The contract authority or budget authority for any funding increment.
  b. HUD must give HA written notice of the reduction.

Annual Contributions Contract (October 23, 1997), Section 14.
  a. The Authority must maintain complete and accurate books of account and records for a
     program. The books and records must be in accordance with HUD requirements, and
     must permit a speedy and effective audit.
  b. The Authority must furnish HUD such financial and program reports, records, statements,
     and documents at such times, in such form, and accompanied by such supporting data as
     required by HUD.
  c. HUD and the Comptroller General of the United States, or their duly authorized
     representatives, must have full and free access to all HA offices and facilities, and to all
     the books, documents, and records of the Authority relevant to administration of the
     program, including the right to audit and to make copies.




                                               21
HUD Handbook 7510.1G states it is the responsibility of the authority to maintain complete and
accurate records of all financial management functions. These records must be maintained in a
way that will

       Provide an effective system of internal control to safeguard cash and other assets,
       Provide budgetary control over the various programs,
       Provide timely, accurate, and complete financial information for management decision
       making,
       Provide the authority with financial data needed to prepare required HUD reports, and
       Permit a timely and effective audit.

HUD Handbook 7510.1G, chapter 2, section 2, states that the Authority must have records
which adequately identify the source and application of funds provided for HUD-assisted
activities. These records must contain information pertaining to program awards and
authorizations, obligations, unobligated balances, assets, liabilities, outlays or expenditures, and
income.

The authority may maintain its own accounting records, or it may contract for accounting
services. In either case, it is the responsibility of the authority to maintain financial records
which

       Adequately identity the source and application of all program funds and HUD funds,
       Provide the basis for budgetary control and monitoring of financial activities and the
       financial position of programs,
       Contain the information necessary to determine compliance with budgetary and
       legal/contractual requirements,
       Provide supporting documentation for transactions and an adequate audit trail, and
       Provide the basis for preparation of required financial reports on a timely basis.

Books and accounts must be complete and accurate. The books of original entry must be kept
current at all times, and postings must be made at least monthly to ledger accounts. All records
and files must be stored appropriately, and all supporting documentation must be maintained in a
safe and accessible location.

PIH Notice 2007-14.
Calendar year funds may not be used to cover any prior year deficits. However, PHAs may use
funds in the Administrative Fee Equity account for such purposes.

PIH Notice 2008-15, Section 14(A).
PHAs may only use CY [calendar year] 2008 HAP [housing assistance payment] funding for
housing assistance payments, and only for CY 2008 and future CY HAP needs.

PIH Notice 2008-15, Section 15.
CY 2008 funds may not be used to cover any prior year deficits. However, PHAs may use funds
in the Administrative Fee Equity account for such purposes.



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