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
May 14, 1996 Audit-Related Memorandum
No. 96-AT-256-1814
MEMORANDUM FOR: Charles T. Ferebee, Director, Community Planning and
Development Division, 4FD
FROM: Kathryn Kuhl-Inclan
District Inspector General for Audit-Southeast/Caribbean, 4AGA
SUBJECT: HUD State Office Request
Housing Authority of the City of High Point
HOPE 3 Program
High Point, North Carolina
We have completed a limited survey of the HOPE 3 Program of the Housing Authority of th e
City of High Point, North Carolina (Authority), for the period December 4, 1992, throug h
December 7, 1995. Our objectives were to determine if the Authority (1) had provided it s
required local match, and (2) kept proper accounting records of the receipt and expenditure of
funds from property sales. We initiated the review based on your request.
BACKGROUND
HUD awarded the Authority a HOPE 3 grant of $885,600 on December 4, 1992. The grant was
to be used to rehabilitate 38 scattered site public housing units and to sell the properties to low-
income first time homebuyers. The grant required the Authority to provide a 33 percent cash or
in-kind match which the Authority agreed to provide in cash.
Effective May 11, 1995, HUD suspended the Authority's approval to draw grant funds because
it (1) had not provided its match and (2) had not expeditiously used proceeds from sellin g
properties.
SCOPE
We interviewed Authority staff pertaining to accounting procedures and the local match. W e
reviewed balances in Authority accounts for (1) Accounts Receivable HOPE 3 Home Sales and
(2) Accounts Payable HOPE 3 Home Sales. We conducted our review in December 1995 and
March 1996.
We discussed the results of our review with you and your staff on March 25, 1996.
REVIEW RESULTS
The Authority provided its local match but did not record the transaction correctly in it s
accounting records. The required match in December 1995 was about $90,750 based on 3 3
percent of grant expenditures. The Authority provided a match of $161,331 from money HUD
allowed the Authority to retain from home sales in its Turnkey III Program. The Authority used
the money to make loans to families so they could purchase homes rehabilitated in the HOPE 3
Program. The Authority incorrectly recorded the $161,331 as an account receivable in th e
Turnkey III Program. To be credited as the Authority's local match , the funds should be recorded
as an account receivable and equity contribution in the HOPE 3 Program.
The Authority needed to improve its reporting of HOPE 3 Program activities. The Authorit y
accounted for HOPE 3 activities within the Public Housing Program accounting system. Th e
account for property sales, titled Accounts Payable HOPE 3 Home Sales, recorded sales of 13
houses totaling $544,292, and expenditures of $182,012. While the Authority had accounting
control over HOPE 3 activities, it's annual financial report did not include a separate balanc e
sheet for the HOPE 3 Program. As a result, the financial statements did not give HUD sufficient
information for effective program monitoring. As an example, the Authority had HOPE 3
Program sales income of $455,517 in 1994 which was not identified as such in the annua l
financial report.
We suggest that you require the Authority to (1) record the Turnkey III Program funds whic h
were considered local match as an account receivable and equity contribution in the HOPE 3
Program, and (2) provide separate financial statements for the HOPE 3 Program as part of it s
annual audit.
We provided a copy of this memorandum to the Authority.
We appreciate your cooperation during the review. Sho uld you or your staff have any questions,
please call Rudy E. McBee, Assistant Distri ct Inspector General for Audit, at (423) 545-4368, or
Bruce Milligan, Senior Auditor, at extension 4056.
Attachment - Distribution
Attachment
DISTRIBUTION
Secretary's Representative, 4AS
Comptroller, 4AF
Audit Liaison Officer, 4AFI
Director, Field Accounting Division, 4AFF
Director, Community Planning and Development, 4FD
State Coordinator, Greensboro, North Carolina, 4FS
Audit Liaison Officer, Community Planning and Development, D (Room 7100)
Chief Financial Officer, F, Room 10164 (2)
Director, Office of Internal Control and Audit Resolution, FOI
(Room 10176) (2)
Associate Director, US GAO, 820 1st St. NE Union Plaza, Bldg. 2,
Suite 150, Washington, DC 20002, (2)
(Room 4122) (3)
Assistant to the Deputy Secretary for Field Management, SDF
(Room 7106)
Executive Director, Housing Authority of the City of High Point
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
May 14, 1996
Mr. H. K. Martin
Executive Director
Housing Authority of the
City of High Point
P. O. Box 1779
High Point, NC 27261-1779
Dear Mr. Martin:
An informational copy is enclo sed of the report dated May 14, 1996, on our limited survey of
the Authority's HOPE 3 Program. Charles Ferebee, Director, Community Planning an d
Development Division, is the HUD action official for the report. He or his representative wil l
contact you to initiate any action resulting from the report.
We appreciate the cooperatio n given our auditor during the review. Please call me (404-331-
3369) if you have any questions.
Sincerely,
Kathryn Kuhl-Inclan
District Inspector General
for Audit-Southeast/Caribbean
Enclosure
HA of the City of High Point, High Point, NC
Published by the Department of Housing and Urban Development, Office of Inspector General on 1996-05-14.
Below is a raw (and likely hideous) rendition of the original report. (PDF)