oversight

Sylvester HA, Sylvester, GA

Published by the Department of Housing and Urban Development, Office of Inspector General on 1996-06-19.

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

                                    U.S. Department of Housing and Urban Development

                                    District Office of the Inspector General
                                    Richard B. Russell Federal Building
                                    75 Spring Street, SW, Room 700
                                    Atlanta, GA 30303-3388
                                    (404) 331-3369




June 19, 1996                       Audit Related Memorandum
                                         No. 96-AT-202-1808


MEMORANDUM FOR:   Harold E. Saether, Director, Office of Public
                  Housing, 4APH


FROM:   Kathryn Kuhl-Inclan
        District Inspector General for Audit, Southeast/Caribbean,
        4AGA


SUBJECT:   Sylvester Housing Authority
           Sylvester, Georgia


     We have completed the limited review of cash collection
activities at the Sylvester Housing Authority and submitted a
referral to the Special Agent in Charge to begin an investigation.
This memorandum will serve to summarize and apprise you of the
final results of that review.     I am most appreciative of your
cooperation in this joint effort and of the assistance of Gloria
Simmons, Diana Lewis, and Delores Register of your staff in
completing this assignment.

     As you know, Congressman Saxby Chambliss wrote to HUD on
September 11, 1995, advising of a cash shortage at the Sylvester
Housing Authority. The shortage was brought to his attention by
the town's Mayor who had requested his help in getting an
independent audit of the records. The Congressman's letter was
forwarded to us on September 22, 1995. Meanwhile, your office had
notified us of the alleged discrepancy. Together, we began work at
the authority on October 30, 1995, to determine the extent of the
alleged cash shortage.

                              SUMMARY

     The housing authority's management compromised its controls
over cash collections.     Management allowed employees to issue
handwritten receipts in lieu of posting collections directly to its
computerized control system and did not perform the supervision
necessary to assure the subsequent posting of the handwritten
receipts. Management did not provide for a separation of duties
which is basic to a good internal control system. As a result, we
confirmed that $55,782 was misappropriated, and the housing
authority could lose additional revenue because it cannot
substantiate the accuracy of its tenant accounts receivable.

                             DETAILS

     The authority's collection system is designed to have
collections posted directly to a tenant's account. The key to the
system is a computer generated, sequentially numbered receipt that
shows the amount posted and the new balance.       One copy of the
receipt is given to the resident and one copy is retained by the
PHA.   The system provides for the daily summarization of the
receipts (postings) for comparison to and validation of deposits.
For the system to work, an independent comparison and verification
must be performed by someone other than the person who collects the
rent and posts the accounts.       Our review of the authority's
operations disclosed that the PHA did not follow prescribed
procedures, properly segregate duties, or implement adequate
compensating controls.

     -    The PHA did not properly segregate collection duties. It
          allowed one individual to have control over receipt,
          posting, and deposit of collected funds. The condition
          continued to exist at the time of our visit.

     -    The PHA allowed issuance of handwritten receipts in lieu
          of posting to the computer. The PHA did not ensure that
          the handwritten receipts were subsequently posted.

     -    The PHA did not adequately supervise the collection
          activities. There was no documented verifications and
          reconcilations by the Executive Director or other staff
          members.

     -    The PHA accepted cash in payment of rent and accumulated
          the cash for the week before making a deposit.       The
          acceptance and accumulation of cash should be avoided
          whenever possible.

     -    The PHA did not aggressively pursue payment on overdue
          accounts. Although it was the PHA's policy to do so, the
          responsible employee had simply failed to perform this
          duty.     The Executive Director relied on the same
          individual who performed the collection duties to send
          notices on overdue accounts. Because she did not closely
          supervise the receivable activities, she did not realize
          that the notices were not being sent out.
Tenant Accounts Receivable

     Because rent payments were not properly posted to the
residents' accounts for over a 4 year period, the accuracy of the
individual balances could not be readily determined. Thus, the
housing authority could not substantiate the amount of rent each
resident owed.    This has hampered the authority's ability to
collect past due rent.


     We attempted to verify the accuracy of the tenant account
balances through confirmation letters and meetings with the
residents, but we were unsuccessful.    Of the 17 residents who
responded to our confirmation requests, 16 said they did not owe
the amount of rent stated on the confirmation letter.        The
residents, however, did not provide receipts to support their
position.   The PHA has begun analyzing each resident's payment
history to determine the correct balances.

Excess Credits to Residents' Accounts

     During our review of rent receipts, we noted in some cases the
credit to the resident's account exceeded the amount of the
receipt. These excess credits totaled $10,211. We believe these
excess credits represent a return of the misappropriated funds or,
more likely, a misapplication of other residents' payments to cover
the shortages (lapping of accounts).

RECOMMENDATIONS

We recommend that your office:

1A.   Assist this housing authority in implementing control
      measures to ensure its control systems are not
      compromised in the future, by for example:

           segregating, to the extent    possible,   the   collection
           duties among its staff;

           prohibiting the use of handwritten receipts;

           formalizing supervisory procedures;

           making daily deposits and discouraging rent payments in
           cash; and

           aggressively pursing payment on delinquent accounts.

1B.   Consider the PHA a high risk when setting your priorities
      for management reviews because of management's failure to
      maintain adequate controls.

1C.   Follow up to ensure the housing authority makes proper
claim and   receives   all   funds   due   from   its   bonding
company.
     Please advise us within 60 days of the corrective action taken
or the proposed corrective action and a target date for completion.
We are providing a copy of this memorandum to the housing
authority's board of directors.

     If you or your staff have any questions, please contact Nancy
H. Cooper, Assistant District Inspector General for Audit, or
Dennis Durick, Senior Auditor, at (404) 331-3369.

Attachments:

     1 -   Schedule of Ineligible Costs
     2 -   Distribution
                                                  ATTACHMENT 1



                   SCHEDULE OF INELIGIBLE COSTS



         Recommendation                 Ineligible1

              1C                        $55,782




     1
      Ineligible amounts obviously violate law, contract, HUD, or
local agency policies or regulations.
                                                  ATTACHMENT 2

                          DISTRIBUTION


Secretary's Representative, 4AS
Director, Office of Public Housing, 4APH
Field Comptroller, 4AF
Director, Accounting Division, 4AFF
Field Audit Liaison Officer, 4AFI
Assistant to the Deputy Secretary for Field Management, SDF (Room
7106)
Chief Financial Officer, F (Room 10166) (2)
Deputy Chief Financial Officer for Operations, FO (Room 10166) (2)
Director, Office of Internal Control and Audit Resolution, FOI
(Room 10176) (2)
Office of Public and Indian Housing Comptroller, PF
  ATTN: Audit Liaison Officer (Room 4122)
Associate Director, US GAO, 820 1st St. NE Union Plaza,
 Bldg. 2, Suite 150, Washington, DC 20002
John Griffin, Moultrie District Office for Congressman Saxby
Chambliss
Board of Directors, N. L. Cheevers, Jr., Chairman, Housing
Authority of the City of Sylvester