oversight

Franklin County HA, West Frankfort, IL

Published by the Department of Housing and Urban Development, Office of Inspector General on 1996-10-03.

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

                                                                   Issue Date

                                                                        October 3, 1996
                                                                   Audit Case Number

                                                                        97-CH-202-1001




TO:           Richard B. Kruschke, Director, Office of Public Housing, Illinois State Office


FROM:         Dale L. Chouteau, District Inspector General for Audit, Midwest


SUBJECT:      Franklin County Housing Authority
              Comprehensive Review
              West Frankfort, Illinois


We completed an audit of the Franklin County Housing Authority. We conducted the audit at
the request of HUD's Illinois State Office. Our audit objectives were to determine whether the
Authority administered its housing activities in an efficient, effective, and economical manner
and in compliance with the terms and conditions of the Annual Contributions Contract, applicable
laws, HUD regulations, and other applicable directives. The audit did not include the Section 8
Program.

The Franklin County Housing Authority needs to improve its procedures. The Authority needs
to do more to improve the administration of its programs and ensure compliance with the Annual
Contributions Contract and other HUD requirements. This report addresses issues related to: (1)
poor cash receipt controls; (2) improper administration of the Public Housing Drug Elimination
grant; (3) inadequate safeguards over its inventories of parts and supplies; and (4) inadequate
controls over tenant accounts receivables.

Within 60 days, please give us, for each recommendation made in the report, a status report on:
(1) the corrective action taken; (2) proposed corrective action and the date to be completed; or
(3) why action is considered unnecessary. Also, please furnish us copies of any correspondence
or directives issued because of the audit.

Should your staff have any questions, please have them contact me at (312) 353-7832.
Management Memorandum




                 (THIS PAGE LEFT BLANK INTENTIONALLY)




97-CH-202-1001                   Page ii
Executive Summary
We completed an audit of the Franklin County Housing Authority. Our audit objectives were to
determine whether the Authority administered its housing activities in an efficient, effective, and
economical manner and in compliance with the terms and conditions of the Annual Contributions
Contract, applicable laws, HUD regulations, and other applicable directives. The audit did not
include the Section 8 Program.

The Authority's internal controls are weak, and offered opportunity for its employees to misuse
or divert funds. We found no evidence that the employees misappropriated assets.




                                      The Franklin County Housing Authority lacked adequate
 The Authority lacked
                                      controls over its cash receipts. Specifically, the Authority:
 adequate controls over its
                                      (1) allowed employees and others to cash personal checks,
 cash receipts
                                      totalling $40,575, against cash rent collections; (2)
                                      reimbursed the petty cash fund $14,659 from cash rent
                                      receipts; (3) did not make bank deposits timely; (4) did not
                                      follow-up on cash shortages and overages in the rent
                                      deposits; (5) did not properly reconcile the cash receipt
                                      drawers; (6) did not properly use rent receipt forms; (7) did
                                      not immediately endorse third party checks for deposit
                                      only; and (8) did not adequately segregate cash receipt
                                      duties. The Executive Director said the problems were due
                                      to administrative oversight. Also, the Authority lacked
                                      established policies or procedures to control the cash receipt
                                      function. Consequently, the Authority cannot assure HUD
                                      that its cash receipts were adequately controlled or
                                      safeguarded.

                                      The Franklin County Housing Authority did not properly
 The Authority did not
                                      administer its Public Housing Drug Elimination Program
 properly administer the
                                      grant. Grant costs of $46,469 were not adequately
 Drug Elimination
                                      supported or did not relate to the administration of the
 Program
                                      Program. Also, the contracts executed lacked specificity as
                                      to the work to be performed. The Authority's former
                                      Executive Director did not ensure that contractors used for
                                      the Program properly supported their costs or that
                                      administrative funds drawn down were used for the
                                      Program grant. As a result, HUD cannot be assured that all
                                      costs associated with the grant were necessary or that the
                                      overall administration of the Program was adequate.



                                               Page iii                                 97-CH-202-1001
Executive Summary




                              The Franklin County Housing Authority did not adequately
 The Authority did not
                              safeguard its inventory of parts and supplies. Specifically,
 properly safeguard its
                              the Authority did not maintain adequate inventory records
 parts and supplies
                              and it lacked written policies and procedures to control its
 inventory
                              inventory. As a result, HUD has no assurance the inventory
                              was properly accounted for and safeguarded against loss,
                              misuse, or waste.

                              The Franklin County Housing Authority lacked adequate
 The Authority lacked
                              controls over its tenant accounts receivable balances. The
 adequate controls over its
                              Authority did not: (1) enforce collection efforts on a
 tenant accounts
                              consistent basis; and (2) obtain the Board of
 receivables
                              Commissioners' approval to write off delinquent accounts.
                              We attribute these deficiencies to a lack of written policies
                              and procedures governing the tenant accounts receivable
                              process. As a result, the Authority cannot assure HUD that
                              its tenants were receiving fair and equitable treatment and
                              that collection efforts were adequate.

                              We recommend that the Director of Public Housing, Illinois
                              State Office, assures that the Authority takes action to
                              correct the weaknesses cited in this report.

                              We provided our draft findings to the Executive Director
                              and HUD's Illinois State Office during the audit. We held
                              an exit conference with the Executive Director on
                              September 18, 1996. The Executive Director provided
                              written comments to our findings and recommendations.
                              Excerpts from the comments are included in each finding
                              and Appendix B contains the complete comments.




97-CH-202-1001                        Page iv
Table of Contents

Management Memorandum                                       i


Executive Summary                                          iii


Introduction                                                1


Findings

    1      The Authority Lacked Controls Over
           Its Cash Receipts                                3

    2      The Authority Did Not Properly
           Administer Its Public Housing
           Drug Elimination Grant                         17

    3      The Authority Did Not Adequately
           Safeguard Its Inventory of Parts
           and Supplies                                   25

    4      The Authority Lacked Adequate
           Controls Over Its Tenant Accounts
           Receivables                                    31


Internal Controls                                         37


Follow Up On Prior Audits                                 39




                              Page v            97-CH-202-1001
Table of Contents




Appendices

        A        Schedule of Unsupported Costs   41


        B        Auditee Comments                43

        C        Distribution                    53




97-CH-202-1001                      Page vi
Introduction
The Franklin County Housing Authority was established by Franklin County pursuant to the laws
of the State of Illinois. The Authority is governed by a Board of Commissioners consisting of
five unpaid members who formulate and direct the Housing Authority's policies. The Chairman
of the Board is William Crocker. The Executive Director, Monica Stewart, is responsible for the
day-to-day operations.

The Authority operates four programs: (1) a Low-Income Housing Program comprised of 686
units, of which 397 are designated as elderly units; (2) a Section 8 Voucher Program consisting
of 49 vouchers; (3) a Comprehensive Grant Program; and (4) a Family Investment Center
Program.

The Authority's books and records are located at its central office at 312 East Elm Street, West
Frankfort, Illinois.



                                    The audit objectives were to determine whether the
 Audit objectives
                                    Authority administered its housing activities in an efficient,
                                    effective, and economical manner and in compliance with
                                    the terms and conditions of the Annual Contributions
                                    Contract, applicable laws, HUD regulations, and other
                                    applicable directives.

                                    To achieve the objectives, we interviewed HUD and
 Audit scope and
                                    Authority staff to obtain information relating to the
 methodology
                                    Authority's operations and internal controls. We reviewed
                                    the Authority's policies and procedures and Board meeting
                                    minutes to evaluate the policies and procedures. We
                                    reviewed the Comprehensive Grant Program files and
                                    contracts for proper execution and support of payments.
                                    We analyzed the Low-Rent, Drug Elimination Grant, and
                                    Family Investment Centers' general ledgers, cash receipts,
                                    cash disbursements, billing statements, and payment
                                    vouchers to verify the accuracy of receipts and
                                    disbursements.      We reviewed bank statements and
                                    cancelled checks to assure that all sources of cash were
                                    accounted for.       We also analyzed tenant accounts
                                    receivables, inventories, bank statements, and investment
                                    records to insure that its assets were safeguarded and
                                    properly recorded in the Authority's records.

                                    The audit covered the period March 1, 1994 to February 29,
                                    1996. We expanded the coverage as necessary. We


                                             Page 1                                   97-CH-202-1001
Introduction



                 performed the on site audit work between April 1996 and
                 August 1996.

                 We conducted our audit in accordance with generally
                 accepted government auditing standards.

                 We provided a copy of our report to the Authority's
                 Executive Director.




97-CH-202-1001           Page 2
                                                                                          Finding 1




 The Authority Lacked Controls Over Its Cash
                  Receipts
The Franklin County Housing Authority lacked adequate controls over its cash receipts.
Specifically, the Authority: (1) allowed employees and others to cash personal checks, totalling
$40,575, against cash rent collections; (2) reimbursed the petty cash fund $14,659 from cash rent
receipts; (3) did not make bank deposits timely; (4) did not follow-up on cash shortages and
overages in the rent deposits; (5) did not properly reconcile the cash receipt drawers; (6) did not
properly use rent receipt forms; (7) did not immediately endorse third party checks for deposit
only; and (8) did not adequately segregate cash receipt duties. The Executive Director said the
problems were due to administrative oversight. Also, the Authority lacked established policies
or procedures to control the cash receipt function. Consequently, the Authority cannot assure
HUD that its cash receipts were adequately controlled or safeguarded.



                                      HUD Handbook 7511.1, Chapter 3, Section 1, Part 4b(3)
 HUD Requirements
                                      states that the cash drawer assigned to an employee for
                                      receiving collections from tenants should not be used by
                                      another employee for any purpose. No other person should
                                      have access to the cash drawer except for a periodic cash
                                      count in the presence of the employee to whom the drawer
                                      is assigned. Part 4b(4)(a) states that all cash receipts should
                                      be prenumbered and should be used in numerical sequence
                                      and all copies of voided receipts should be maintained for
                                      accountability purposes. Part 4b(4)(b) states that cash
                                      receipts are to be signed by the employee receiving the
                                      collection. Part 4b(4)(c) states that employees authorized
                                      to accept rent collections from tenants should be assigned
                                      a set of receipts for his or her sole use.

                                      HUD Handbook 7511.1, Chapter 3, Section 1, Part 5(a)
                                      states that cash receipts should be deposited in the bank
                                      intact, as frequently as possible, preferably daily. If daily
                                      deposits are not possible, due to weekends or holidays, the
                                      cash should be stored in a locked fireproof safe or vault.
                                      Disbursements should never be made from cash receipts.
                                      Part 5(c) states that bank deposit tickets should show
                                      complete details as to coin, currency, and checks deposited.

                                      HUD Handbook 7511.1, Chapter 3, Section 1, Part 6 states
                                      that cash collections should be reconciled daily with the



                                               Page 3                                   97-CH-202-1001
Finding 1



                          total of receipts issued and any cash overage or shortage be
                          accounted for.

                          HUD Handbook 7511.1, Chapter 3, Section 1, Part 7(b)
                          states that the Board of Commissioners should establish a
                          policy governing cash shortages. The policy should
                          identify procedures to follow when cash shortages occur.
                          The procedures should include the type of investigation that
                          should take place, the reports to be prepared, and the factors
                          to consider in determining whether the accountable
                          employee should or should not be relieved of responsibility.

                          Internal control comprises the plan of organization,
                          methods, and procedures adopted by management to ensure
                          safeguarding of resources against waste, loss, and misuse.
                          The important features of an adequate system of internal
                          controls are:

                          •   Control should be established early in a transaction and
                              carried through to its completion.

                          •   No person should have complete control over all phases
                              of any significant transaction.

                          •   Work should flow from one employee to another
                              without ever returning to an employee.

                          •   Record keeping should be separate from operations or
                              the handling and custody of assets. For example, the
                              bookkeeping function should be separate from the
                              receipt function including the collection and issuance of
                              receipts. An employee who collects and issues receipts
                              for rental payments should not be responsible for
                              recording payments and adjustments to tenant accounts.

                          We judgmentally selected and reviewed, in detail, four
 Employees cashed their
                          months of rent collections and bank deposits. The months
 personal checks from
                          reviewed were January 1996, December 1995, August
 Authority funds
                          1995, and April 1995. These four months were selected for
                          detailed review in order to evaluate cash receipt activity at
                          various intervals. We performed a limited review of all
                          other rent collections and deposits for the period of January
                          1994 to July 1996.



97-CH-202-1001                     Page 4
                                                   Finding 1



Authority employees cashed personal checks for themselves
and others against the cash collected from tenant rent
payments. The Authority accepts rent payments in cash as
a convenience to the residents, as many residents do not
have a personal checking account. Authority employees
said the practice of cashing personal checks had always
occurred and was allowed for their convenience. The
Executive Director was unaware that the practice of cashing
personal checks was not allowed.

During the period January 1994 to July 1996, Authority
employees and other persons cashed 676 personal checks
totalling $40,575 against cash rent collections. This activity
is summarized as follows:


                                                  Amount
                      Payor                       Cashed
   Executive Director                             $19,274
   Section 8 Coordinator                           7,272
   Section 8 Coordinator's Boyfriend               2,402
   Leasing & Occupancy Specialist                  2,620
   Accounts Receivable Clerk                         949
   Modernization Coordinator                       1,069
   Social Advisor                                    740
   Former Executive Director                         283
   Miscellaneous                                   4,497
   Unknown                                         1,469
                      Total                       $40,575


The miscellaneous amount consisted of: (1) five Authority
employees who cashed between $20 and $200 in personal
checks; (2) two checks from a local car dealership; and (3)
12 nonemployees who cashed between $5 and $274 each.
The unknown amount represents checks listed on the
deposit tickets that were not identified by a name. The
dollar amount was shown on the deposit tickets; however,


         Page 5                                   97-CH-202-1001
Finding 1



                          the payee line was left blank. The Executive Director said
                          the Authority did not cash personal checks for
                          nonemployees and could not explain the miscellaneous or
                          unknown check amounts.

                          The three employees who maintained a rent drawer wrote
                          personal checks against their rent collections, totaling
                          $7,272; $2,620; and $949; respectively. While the three
                          employees cashed checks for other employees, no one
                          watched as they cashed their own personal checks against
                          the rent collections. The Executive Director said the
                          cashing of personal checks had always been a normal
                          practice at the Authority.

                          Since the Authority is not maintaining the rent receipts
                          intact as received by the residents, full accountability and
                          proper safeguarding of the cash assets cannot be assured.

                          We informed the Executive Director that the practice of
                          cashing personal checks was against HUD regulations. She
                          informed us that the practice had stopped during May 1996,
                          after we had spoken to her. During our review, we did not
                          identify any employee personal checks cashed in the June
                          or July 1996 bank deposits. However, the Authority had
                          not implemented a formal policy to prohibit future
                          occurrences.

                          Additionally, the Authority reimbursed its petty cash fund
 Cash rent collections
                          from the cash rent collections. From January 1994 to June
 were used to reimburse
                          1996, the Authority wrote 96 checks totalling $14,659 to
 the petty cash fund
                          petty cash using rent collections to reimburse its petty cash
                          fund. The Executive Director said in the past, the account
                          was reimbursed when it was low and cash was immediately
                          needed, but it was a very infrequent occurrence.

                          The Authority failed to deposit the rent received from its
 Bank deposits were not
                          tenants in a timely manner. The Authority makes bank
 made timely
                          deposits on an as needed basis. There are no prescribed
                          time frames or amount of cash on hand at which a deposit
                          is required. The Executive Director acknowledged that the
                          Authority was lax and some deposits were made late.

                          During the four months reviewed, the Authority failed to
                          deposit 971 receipts totaling $127,460 in a timely manner.


97-CH-202-1001                     Page 6
                                                 Finding 1



The deposits were made from three to 20 days after the rent
was received by the Authority as follows:


                        Number                   Dollar
                        of Days    Deposit      Amount
                                   s
                          3          313       $ 38,578
                          4          234        34,182
                          5          101        13,107
                          6           59         8,906
                          7           85        10,727
                          8           41         4,640
                          9           10         1,237
                         10           47         7,173
                         11           15         2,072
                         12           13         1,171
                         13           17         1,796
                         14            3          495
                         15           15         1,423
                         16            5          429
                         17            4          331
                         18            1          188
                         19            2          377
                         20            6          628
                         Totals      971       $127,460


As outlined in the above table, there were many instances
in which a significant amount of cash such as $10,000 or
more was not deposited timely and was not properly
safeguarded. Also, since the Authority earns interest on



        Page 7                                 97-CH-202-1001
Finding 1



                          funds deposited, the lack of timely deposits results in lost
                          revenue to the Authority.

                          The Authority currently maintains two rent drawers, each
                          located inside the cubicle of two employees. One drawer is
                          maintained by the Authority's Accounts Receivable Clerk
                          and the other drawer is maintained by the Leasing and
                          Occupancy Specialist. Each drawer maintains a $250 daily
                          cash balance. The drawers are not locked during the day
                          and they are not fireproof.

                          The Accounts Receivable Clerk places her rent drawer in a
                          fireproof vault at night and on the weekends. The Leasing
                          and Occupancy Specialist leaves the rent drawer in her
                          locked desk at night and on the weekends. She felt that her
                          locked desk was more secure than the vault because several
                          employees had access to the vault.

                          The Authority did not require the two employees who were
 The Authority did not
                          assigned a rent drawer to reconcile cash activity in the rent
 follow up on cash
                          drawers daily. Rather, the two employees said they
 overages and shortages
                          reconciled the rent drawers about once a week. Also, the
                          Authority did not follow-up on cash shortages and overages
                          in its deposits.

                          The amount of cash in the two rent drawers is not
                          reconciled by the Authority when it prepares a bank
                          deposit. If an error was made in determining the amount to
                          be deposited, the bank deposit would be short or over and
                          the error would not be detected until the rent drawers were
                          reconciled.

                          On numerous occasions, bank deposit tickets we reviewed
                          showed minor cash shortages and cash overages. For
                          example, one deposit ticket dated August 2, 1995 was over
                          by $10 and another deposit ticket, dated August 4, 1995,
                          was short by $10. On two deposit tickets, dated May 3,
                          1995 and May 12, 1995, an employee wrote on the deposit
                          ticket that the amount was purposely $3 short and $3 over,
                          respectively.

                          On January 9, 1996, the Authority's bank deposit was $100
                          less than the amount that should have been deposited. The
                          Section 8 Coordinator, who maintained one of the


97-CH-202-1001                     Page 8
                                                                             Finding 1



                           Authority's cash drawers at the time, said the recorded total
                           rent receipts were $100 less than the amount actually
                           collected and the deposit total was obtained from the
                           recorded receipt total. Also, the Section 8 Coordinator said
                           because the amount deposited was $100 less than the
                           amount that should have been deposited, the rent drawer
                           balance was probably $100 over when the deposit was
                           made. On January 17, 1996, the bank deposit was $100
                           more than the recorded receipt total. The Section 8
                           Coordinator said the $100 overage was probably discovered
                           when the rent receipts and the cash in the drawer were
                           reconciled. The amount of the January 17, 1996 deposit
                           was increased to correct the previous $100 cash shortage.

                           The Authority did not have procedures to investigate cash
                           shortages or cash overages. The Executive Director
                           acknowledged that these shortages and overages did occur,
                           but said it was an infrequent occurrence. Also, the
                           Executive Director said a new cash management policy was
                           being prepared and it would include a section to handle
                           cash shortages and overages. The cash management policy
                           is expected to be finalized after completion of our audit
                           work.

                           The Authority does not reconcile its cash drawers daily, as
Cash drawer
                           prudent business practice dictates. According to the
reconciliations were not
                           Executive Director, the cash drawers are reconciled
properly performed
                           approximately each week during the first part of the month.
                           However, the reconciliations are not documented and the
                           dates they are performed are not recorded by the Authority.
                           She acknowledged that they had become lax in this area.

                           By not properly performing cash drawer reconciliations, the
                           Authority is not adequately safeguarding its cash assets and
                           cannot assure HUD that it properly controlled its cash
                           receipts.

                           The Authority did not use prenumbered rent receipt forms
Rent receipt forms were
                           for regular tenant rents collected. Prenumbered receipts
not properly used
                           were only used for rent adjustments and to record payments
                           made for other than regular monthly rent. The Authority
                           did not maintain the voided pre-numbered rent receipt
                           forms.



                                    Page 9                                  97-CH-202-1001
Finding 1



                            For regular tenant rents, the Authority manually stamped a
                            set of rent cards with the date paid and a receipt number
                            when the rent was paid by the tenant each month. A receipt
                            properly recording the transaction was not made outlining
                            the method of payment such as cash, check, or money
                            order. Also, the rent card was not signed by the Authority
                            employee conducting the transaction. This does not allow
                            for proper accountability of the cash transaction should
                            there be a discrepancy in the cash receipt or deposit
                            process. Additionally, the rent checks were not always
                            immediately endorsed "For Deposit Only" to the Authority's
                            account.

                            During the four months reviewed, we identified the
                            following discrepancies: (1) the same receipt number was
                            issued to two different tenants in seven cases; and (2) the
                            rent card was stamped with two different receipt numbers
                            in eight cases. The first number was voided on the rent card
                            and in one case, the number was not sequential. The
                            Executive Director said it was probably human error that
                            caused the rent cards to have duplicate and voided receipt
                            numbers on them. The Executive Director said the
                            Authority was working with a consultant to obtain a new
                            computer system. The new system would be used for
                            tenant rents and would be able to print prenumbered rent
                            receipts.

                            The Authority did not maintain the prenumbered rent
                            receipts that were voided. The Accounts Receivable clerk
                            said the receipts that were voided were discarded. Without
                            maintaining these receipts, proper accountability cannot be
                            assured.

                            The Authority accepts third party checks such as
 Third party checks were
                            government aid checks and social security checks for rent
 not immediately endorsed
                            payments. These checks are not immediately endorsed "For
 for deposit only
                            Deposit Only" in the Authority's account. Once they are
                            signed by the payee, the check becomes a bearer instrument
                            and can be cashed by anyone. Endorsing the check
                            immediately protects both the Authority and the tenant from
                            loss or theft, as the check cannot be cashed and can only be
                            deposited in the Authority's account.




97-CH-202-1001                      Page 10
                                                                              Finding 1



                            The Authority did not adequately segregate the duties
Cash receipt duties were
                            relating to the cash receipt function. The Authority's
not adequately segregated
                            Accounts Receivable Clerk and its Leasing and Occupancy
                            Specialist were the only two employees specifically
                            authorized to accept rent payments. The Accounts
                            Receivable Clerk was also responsible for updating
                            payment records and thus effectively had control over
                            tenant account balances. Although there was no indication
                            that the Accounts Receivable Clerk took advantage of the
                            opportunity to divert rent collections, she could have
                            diverted funds without detection by controlling accounting
                            entries to the cash receipts subsidiary ledger. Proper
                            accounting procedures require adequate segregation of
                            duties in order to provide control and assign accountability
                            over the cash receipt function.

                            The Executive Director said the Accounts Receivable Clerk
                            was assigned to collect rent because of the limited staff.
                            She agreed that this was not a proper segregation of duties.

                            Rent payments were accepted by all staff assigned to the
Several employees
                            Authority's administrative office. There were no policies or
accepted tenant rent
                            procedures that outlined who was specifically authorized to
payments
                            accept rent payments. Two individuals were specifically
                            authorized to accept cash receipts.          However, all
                            administrative staff were allowed to accept rent payments
                            when the assigned individuals were unavailable. Since all
                            administrative staff were allowed to accept rent payments
                            and rent receipt forms were not properly issued, the overall
                            control and proper accountability of the cash receipt
                            function was compromised.

                            The Authority's Executive Director acknowledged that they
                            had not yet adopted policies or procedures to control the
                            cash receipts or any aspect of the financial management
                            process of the Authority. Although the Authority has
                            developed a draft version of a cash management policy,
                            finalization of the policy will not be done until completion
                            of our audit work.

                            Cash is an asset which is easily converted to improper use
                            in the absence of program controls. Therefore, cash must
                            be properly accounted for and adequately safeguarded. The
                            responsibility for safeguarding and accounting for cash rests


                                    Page 11                                  97-CH-202-1001
Finding 1



                   primarily with the Executive Director and Chief Accountant
                   or Financial Manager of the Housing Authority and the
                   individuals receiving, recording, depositing, and disbursing
                   cash. During our review, we found no indication that the
                   Authority's employees took advantage of the opportunity to
                   divert funds.




Auditee Comments   Excerpts from the Executive Director's comments on our
                   draft finding follow. Appendix B contains the complete
                   text of her comments.

                   The Executive Director issued a written memo to all
                   employees on May 9, 1996 explaining that personal checks
                   would no longer be cashed. The issue of cashing personal
                   checks is being addressed in the Financial Management
                   Policy.

                   The checks issued to reimburse petty cash were cashed
                   from Authority funds. This practice is similar to the
                   cashing of personal checks. This practice is no longer
                   being used and will also be addressed in the Financial
                   Management Policy.

                   Presently deposits are being made more timely. The
                   Authority is in the process of instituting a daily written
                   reconciliation and daily deposits. The Authority will
                   continue to maintain two cash drawers and is in the process
                   of obtaining new cash drawers that will be more secure and
                   fireproof. The Financial Management Policy will also
                   address the placing of the cash drawers in the vault and
                   keeping the drawers locked.

                   When a deposit was made the drawers were reconciled. In
                   the Financial Management Policy the Authority will address
                   the procedure for daily reconciliations and the criteria for
                   making a deposit.

                   Although the Authority does not have a written procedure
                   to investigate cash shortages and cash overages, when
                   either have occurred the Authority has attempted to find the
                   error. In most cases the errors have been found.



97-CH-202-1001             Page 12
                                                  Finding 1



The written procedures for investigating cash shortages or
cash overages will be addressed in the Financial
Management Policy.

The Authority acknowledges that it has been lax in
reconciling cash drawers, as previously noted. Again this
will be addressed in the Financial Management Policy.

Both the Accounts Receivable Specialist and the Leasing
and Occupancy Specialist said that after making their
deposits they each count their cash drawers to assure that
the drawers are balanced to $250.00.

The Financial Management Policy will also address the use
of daily written reconciliations.

After the OIG expressed his concern that the statements
were not prenumbered, the Authority began numbering the
rent statements before they were mailed. The Authority
found that this created some problems. Some of the
statements were not returned when payments were made
(due to them being lost, torn, etc.) therefore the Authority
has rent receipt numbers that cannot be accounted for.

All rent statements are numbered with a duplicate number
stamper when the statement is returned from the bank or
when a resident pays their rent. Therefore, all rent
statements are numbered at some point. The Authority does
use prenumbered receipts for payments and adjustments.
The voided prenumbered receipts are retained by the
Authority and placed in the batches.

The Authority has plans to obtain software that will
generate cash receipts, which will give all the information
that is needed.

Since approximately July 1, 1996 we have been stamping
checks upon receipt. This procedure will also be addressed
in the Financial management Policy.

The Executive Director does agree that duties should be
more segregated, but finds this difficult because of the size
of the Authority staff.



        Page 13                                  97-CH-202-1001
Finding 1



                    Although the Accounts Receivable Specialist collects rent
                    and posts to the computer, the receipts with the deposit slip
                    goes to the Section 8 Coordinator to be posted manually
                    and to be batched. When batching the receipts the Section
                    8 Coordinator verifies that the receipts balance with the
                    deposit slip. After batched, the receipts go back to the
                    Accounts Receivable Specialist to be posted on the
                    computer.

                    The Authority feels that once computer generated receipts
                    are used it will allow less chance for any account to be
                    manipulated.

                    Approximately June 1, 1996 the Executive Director
                    informed all staff that the Leasing and Occupancy Specialist
                    and the Accounts Receivable Specialist would be accepting
                    rent payments.

                    Although the Board of Commissioners has not formally
                    adopted a Financial Management Policy, many procedures
                    have been implemented by the Executive Director and
                    carried out by the staff.

                    Some of the procedural changes the Authority has
                    implemented since the Inspector General audit began
                    includes: no longer cashing personal checks, only two staff
                    members collect rent and have access to their assigned cash
                    drawers, all deposits are verified by a second party, all
                    deposits are placed in a locked bank bag by a third party
                    and taken to the bank by a fourth party, and all checks are
                    stamped "For Deposit Only" upon receipt.



OIG Evaluation of   The Authority's current development of a financial
Auditee Comments    management policy shows positive action to address the
                    finding and recommendations.

                    The Section 8 Coordinator's matching of rent receipts with
                    bank deposit slips would not necessarily prevent the
                    Accounts Receivable Specialist from diverting rent
                    collections. The collection of rent and posting of payments
                    to tenant accounts still gives the Accounts Receivable
                    Specialist control over tenant account balances.



97-CH-202-1001              Page 14
                                                                   Finding 1




Recommendations   We recommend that the Director of Public Housing, Illinois
                  State Office, assure that the Franklin County Housing
                  Authority:

                  1A.    Prohibits the cashing of personal checks and
                         reimbursing of the petty cash fund using cash rent
                         collections.

                  1B.    Ensures that all cash receipts are deposited intact
                         and in a timely manner. A fireproof safe should be
                         used for the storage of all monies kept overnight and
                         on weekends.

                  1C.    Reconciles cash balances on a daily basis and
                         investigates cash shortages and overages. The
                         Authority should follow-up on all cash shortages
                         and overages to determine the reason for the
                         discrepancies and take any necessary corrective
                         action(s).

                  1D.    Uses prenumbered receipt forms for recording all
                         monies received by the Authority. The receipts
                         should always be signed and dated by the employee
                         receiving the money. Any voided receipts should be
                         maintained for proper accountability.

                  1E.    Immediately endorses all third party checks received
                         "For Deposit Only."

                  1F.    Segregates the duties of its employees to the extent
                         practical. No employee should have complete
                         control over all phases of the cash receipt function.

                  1G.    Restricts rent collection responsibilities only to
                         specific authorized employees.

                  1H.    Establishes formal policies and procedures to
                         control cash receipts. The policies and procedures
                         should be approved by the Authority's Board of
                         Commissioners.




                          Page 15                                 97-CH-202-1001
Finding 1




                 (THIS PAGE LEFT BLANK INTENTIONALLY)




97-CH-202-1001                   Page 16
                                                                                       Finding 2




The Authority Did Not Properly Administer Its
   Public Housing Drug Elimination Grant
The Franklin County Housing Authority did not properly administer its Public Housing Drug
Elimination Program grant. Grant costs of $46,469 were not adequately supported or did not
relate to the administration of the Program. Also, the contracts executed lacked specificity as to
the work to be performed. The Authority's former Executive Director did not ensure that
contractors used for the Program properly supported their costs or that administrative funds
drawn down were used for the Program grant. As a result, HUD cannot be assured that all costs
associated with the grant were necessary or that the overall administration of the Program was
adequate.



                                     The Drug Elimination Program grant agreement signed by
 HUD Requirements
                                     the Authority on November 4, 1992 states that all costs
                                     associated with the grant must be reasonable and necessary.

                                     The contracts that the Authority executed with the Franklin-
                                     Williamson Human Services Agency and the West
                                     Frankfort Police Department state that the contractors shall
                                     provide documentation as to the activities initiated.

                                     The Authority contracted with Franklin-Williamson Human
 A contractor did not
                                     Services Agency (the Agency), a non-profit organization,
 perform required services
                                     to administer the portion of the Drug Elimination Program
                                     that dealt with education and direct resident contact. The
                                     contract was for $96,024 and covered a 24 month period
                                     from January 20, 1993 to January 20, 1995. During this
                                     period, the Agency was required to provide programs and
                                     services designed to educate Authority residents in areas of
                                     substance abuse.

                                     The contract specified that a full time substance abuse
                                     coordinator shall be furnished by the Agency to administer
                                     the Drug Elimination Program. According to Agency
                                     officials, a full time coordinator is required to work 37.50
                                     hours per week, or 450 hours per quarter. The Agency's
                                     contract amount was largely based upon the cost of a full
                                     time coordinator. The Agency billed the Authority on a
                                     quarterly basis for services rendered.



                                              Page 17                                 97-CH-202-1001
Finding 2



                             The Authority was billed by the Franklin Williamson
 The Authority was billed
                             Services Agency for services the Agency did not provide.
 for services not provided
                             The Agency billed the Authority $12,003 per quarter for six
                             quarters, as specified by their contract and it billed the
                             Authority for lesser amounts for three other quarters.
                             However, the Agency routinely worked less than the
                             required hours to support their billings.

                             During the contract period of January 20, 1993 to January
                             20, 1995, the Agency was required to provide 3600 hours
                             of service (150 hours per month for 24 months). During
                             that period the Agency could provide documentation to
                             support 2,320 hours, or 64 percent, of the required contract
                             hours. The Agency used the number of hours worked as a
                             percentage of hours required as a basis for billing during the
                             April to June 1994 period.

                             Agency officials acknowledged that they were not able to
                             provide the required time to the Drug Elimination Program
                             during much of 1994, and that this negatively impacted the
                             overall effectiveness of the Program. However, they did
                             not perform any type of analysis at the end of the program
                             to determine if the intended program results were achieved.
                             The Agency officials also said they tried as best they could
                             to properly administer the Program grant and were proud of
                             their efforts.

                             The Agency extended their services beyond the contract
                             expiration date of January 20, 1995. According to Agency
                             officials, services were provided until March 31, 1995,
                             because the Agency provided less time than planned during
                             much of 1994. Personnel problems within the Agency,
                             specifically employee turnover which could not be
                             controlled, were incurred during the administration of the
                             Program. Although the Agency did not have a contract
                             extension with the Authority, the Agency felt they owed the
                             Authority these additional services to wrap up the Program
                             as well as to properly administer the contract. During the
                             extended period, the Agency performed an additional 300.5
                             hours of work for a total of 2,620.5 hours, or 73 percent, of
                             the required total hours. Additionally, HUD granted the
                             Authority a six month extension for completion of the Drug
                             Elimination Program through May 1995. The Agency



97-CH-202-1001                       Page 18
                                                                Finding 2



              thought this extended their time to administer the grant as
              well.

              The maximum contractual amount the Agency could have
              earned, had they performed all required hours, was
              $96,024. However, having only completed 73 percent of
              the required hours, the Agency is only entitled to collect a
              maximum of $70,097 (73 percent of $96,024). The Agency
              was actually paid $93,439 for their services, or $23,342
              over the amount actually earned.

              The following table outlines the hours worked by Franklin-
              Williamson in relation to the hours required and the
              amounts billed:


                                                          Ratio of
                                                          Hours
                                                          Worked to
        Time                    Amount        Hours       Hours
        Period                   Billed       Worked      Required
1/93-3/93                  $12,003         Unknown        N/A
3/93-5/93                  $12,003           150.0         33%
6/93-9/93                  $12,003           644.75       107%
10/93-12/93                $12,003           408.0         91%
1/94-3/94                  $12,003           194.25        43%
4/94-6/94                  $ 4,761           178.5         40%
7/94-9/94                  $ 6,387           219.5         49%
10/94-12/94                $12,002           367.0         82%
1/95-3/95                  $10,274           458.5        102%
        Totals             $93,439         2,620.5         73%




                      Page 19                                 97-CH-202-1001
Finding 2




                           The Authority paid the West Frankfort Police Department
 Payments to West
                           $64,689, under two separate contracts for the Drug
 Frankfort police were
                           Elimination Program grant. The contracts were to cover
 unsupported
                           additional police services that were beyond the normal
                           services already provided to the Authority's developments.
                           These additional services included foot patrols at all
                           Authority developments and providing personnel to the
                           Southern Illinois Task Force.

                           During our review of amounts the Authority paid to the
                           Police Department, we found that the Authority improperly
                           paid three invoices totalling $14,856. These invoices did
                           not include information as to the services provided and
                           there were no time records to support the hours billed on the
                           invoices. During our review of the invoices, it could not be
                           determined what housing developments the services were
                           provided to, which officers provided the services, the times
                           the services were provided, and what was accomplished by
                           these additional services.

                           In addition to the lack of adequate supporting
                           documentation, two of the three invoices in question
                           included services performed prior to the execution of the
                           contracts between the Authority and the Police Department.
                           The contracts became effective on December 11, 1992.
                           The Police Department submitted a $5,000 invoice for
                           housing patrol services for the period of December 1 to
                           December 23, 1992 and a $5,056 invoice for an undercover
                           agent assigned to the Task Force for the period of
                           December 1, 1992 to March 31, 1993. Therefore, both
                           invoices billed for services that were provided prior to the
                           execution of the contracts. Authority officials could not
                           explain why the Police Department billed for services prior
                           to the contract execution date.

                           The Authority drew down excess administrative funds of
 The Authority drew down
                           $8,271 under the Drug Elimination Program grant. This
 excess funds for
                           amount included $4,886 in unsupported salary costs, $2,000
 administrative costs
                           in audit costs that were not incurred, and $1,385 for a
                           security camera that the Authority had not purchased.



97-CH-202-1001                     Page 20
                                                                               Finding 2



                              The Authority drew down $5,584 to pay for salaries of the
                              former Executive Director and the current Executive
                              Director for their time associated with the Program grant.
                              The Executive Director and the former Executive Director
                              were the only individuals at the Authority who pro-rated
                              their time to the Drug Elimination Program.

                              There was no support for the former Executive Director's
                              time spent on the Program grant. The current Executive
                              Director provided support for time she spent administering
                              the Program from 1992 to 1995. The total cost of her time,
                              according to her records, was $698. The remaining balance
                              of $4,886 received by the Authority for Executive Director
                              salary costs was unsupported.

                              The Authority budgeted and drew down $2,000 for an audit
                              of the Drug Elimination Program grant funds. However,
                              the Program expenses were audited as part of the
                              Authority's annual audit at no additional cost to the
                              Authority.

                              Additionally, the Authority drew down funds for two
                              security cameras. One of the cameras, budgeted at $1,385,
                              was not purchased as anticipated due to complications with
                              the contractor. The Executive Director said the camera may
                              be purchased and installed in the high-rise development at
                              a later date when the lock system is changed. However,
                              there are no immediate plans to purchase the camera. The
                              funds received from HUD for the security camera were
                              deposited in the Authority's operating account and used for
                              normal operating expenses.
                              The Authority entered into a total of eight contracts under
Contracts did not
                              the Drug Elimination Program. None of the contracts
specifically state the work
                              adequately specified the services to be provided by the
to be performed
                              contractors. The contracts primarily addressed the dollar
                              amount and frequency of payments to the contractors.

                              For example, contracts with the police departments did not
                              specify how often the foot patrols would take place, which
                              housing developments would be patrolled, the time periods
                              that the patrols would take place, or how many officers
                              would patrol at a time. The contracts simply outlined how
                              much the police departments would be paid over the life of



                                      Page 21                                97-CH-202-1001
Finding 2



                   the contracts and the frequency of payments by the
                   Authority.

                   The lack of specificity in the contracts as to the work to be
                   performed makes it difficult for the Authority to evaluate
                   whether the contractors actually provided the services as
                   intended in the contractual arrangements.



Auditee Comments   Excerpts from the Executive Director's comments on our
                   draft finding follow. Appendix B contains the complete
                   text of her comments.

                   The Authority will contact the Agency and seek supporting
                   documents for the amount paid. If supporting documents
                   are not provided the Authority will take necessary steps to
                   re-pay the amount owed to HUD.

                   The Authority will ask the West Frankfort Police
                   Department for supporting documents for the amounts paid.
                   If supporting documents cannot be provided the Authority
                   will take necessary steps to re-pay the amount owed to
                   HUD.

                   The Authority will seek supporting documents from the
                   former Executive Director for his time spent on the
                   program.

                   The Authority did not incur any additional costs for the
                   audit and will return the $2,000 as requested.

                   The Authority does anticipate eventually installing the
                   security camera that the funds were requisitioned for. The
                   Authority is requesting to keep the funds and the camera
                   will be installed in the very near future.

                   The Authority assures the OIG and Department of HUD
                   that all future contracts will be properly executed and funds
                   will not be expended until the contracts are properly
                   executed. The Authority assures the OIG and the
                   Department of HUD that all future contracts will be much
                   more specific as to what is to be provided by the
                   contractors.



97-CH-202-1001             Page 22
                                                                   Finding 2




Recommendations   We recommend that the Director of Public Housing, Illinois
                  State Office, assure that the Franklin County Housing
                  Authority:

                  2A.        Provides justification for $23,342 in costs
                             applicable to the Franklin-Williamson contract
                             for hours of service not provided as specified in
                             the contractual arrangement.        If adequate
                             justification cannot be provided, the Authority
                             should repay HUD for any unsupported amount.

                  2B.        Provides documentation to support $14,856 of
                             Drug Elimination Program services provided by
                             the West Frankfort Police Department between
                             December 1992 and March 1993. If supporting
                             documentation cannot be provided, the
                             Authority should repay HUD for any
                             unsupported amount.

                  2C.        Provides documentation to support the use of
                             $8,271 of Drug Elimination Program
                             administrative funds.        If supporting
                             documentation cannot be provided to show that
                             the funds were used for the Drug Elimination
                             Program, the Authority should repay HUD for
                             any unsupported amount.

                  2D.        Ensures that all future contracts specifically
                             address the work to be performed to provide a
                             basis for analysis of contractor results.




                          Page 23                                 97-CH-202-1001
Finding 2




                 (THIS PAGE LEFT BLANK INTENTIONALLY)




97-CH-202-1001                   Page 24
                                                                                      Finding 3




 The Authority Did Not Adequately Safeguard
      Its Inventory of Parts and Supplies
The Franklin County Housing Authority did not adequately safeguard its inventory of parts and
supplies. Specifically, the Authority did not maintain adequate inventory records and it lacked
written policies and procedures to control its inventory. As a result, HUD has no assurance that
the inventory was properly accounted for and safeguarded against loss, misuse, or waste.




                                    Section 309 of the Annual Contributions Contract requires
 HUD requirements
                                    housing authorities to maintain complete and accurate
                                    books of accounts and records.

                                    HUD Handbook 7510.1, The Low-Rent Accounting
                                    Handbook, Chapter 7, paragraph 5(g) requires local
                                    authorities to inventory equipment and supplies annually
                                    and compare the inventory results with inventory records.
                                    housing authority records must be adjusted for any
                                    differences.

                                    The Authority did not maintain adequate inventory records
 Inventory records were
                                    of the parts and supplies stored at its warehouse. The
 not properly maintained
                                    Authority records and controls its inventory through an
                                    Inventory by Part Number With Costs Report (inventory
                                    report). This record, however, does not accurately reflect
                                    the actual inventory usage or inventory balance maintained
                                    by the Authority.

                                    The Authority's "Inventory by Part Number With Costs
 The Authority's inventory
                                    Report" records materials purchased and used during the
 record was inaccurate
                                    year, and the current cost of each part. It is used by the
                                    Maintenance Department to keep track of the inventory in
                                    stock. This report is adjusted at year end for any difference
                                    resulting from the annual inventory count. However, the
                                    overall accuracy or usefulness of the report is questionable
                                    because of poor inventory controls.

                                    We conducted an inventory count on June 10 and 11, 1996,
                                    using the Authority's latest inventory records. We
                                    compared the inventory records to actual items on hand.



                                             Page 25                                 97-CH-202-1001
Finding 3



                           Eighty five commonly used parts and supplies were
                           selected for our review. The Authority maintains an
                           inventory of approximately 826 different parts. The
                           Authority's records indicated that the aggregate value of the
                           parts and supplies was approximately $23,000. The
                           Authority purchased approximately $50,000 worth of
                           supplies during the year.

                           During our inventory count, 29 of 85 items (34 percent) had
                           greater quantities on hand than the Authority's inventory
                           records indicated; 27 of 85 items (32 percent) had fewer
                           quantities on hand, and 29 of 85 items (34 percent) had
                           quantities that agreed with amounts shown on the
                           Authority's inventory records. Overall, 66 percent of the
                           items examined had incorrect quantities listed. Some
                           examples of the discrepancies follow:


                                                 Quantity
                                                   Per        Quantity
                      Part           Part       Authority     Per OIG
                   Description      Number      Records        Count      Difference
                 Faucet Stem       1410             18           24          6
                 Drain Stopper     2306             18            5         (13)
                 Supply Line       3340             14           24         10
                 Heater Element    4215             10            8         (2)
                 Faucet            5221             5             7          2
                 Burner            9350             3             0         (3)
                 Element           9570             4             5          1
                 Element           9575             2             4          2
                 Bulb              21330            24           45         21
                 Exterior Paint    27368            10           12          2
                 Exterior Paint    27369            2            10          8
                 Interior Paint    27385            44           40         (4)
                 Interior Paint    27390            18           23          5




97-CH-202-1001                     Page 26
                                                      Finding 3



The Authority established re-order points for each part or
supply listed on the inventory sheets. However, the
usefulness of the re-order points is diminished because the
inventory report is not accurate.          The Authority's
Maintenance Superintendent would like to use the
inventory listing to determine when to re-order parts.
However, he normally has to physically inspect the parts
bins to determine the quantities on hand. He also said he
has run out of some parts and supplies because the
inventory report showed there were sufficient quantities on
hand when that was not actually the case. This is an
inefficient and ineffective way to control inventory. If a
computer system is to be effectively used, the information
should be accurate or it is of little use.

The Maintenance Superintendent said there were several
possible causes for the inaccuracies in the inventory report.
Access to the warehouse is virtually unchecked. Authority
personnel are allowed in the warehouse at any time during
normal business hours. Maintenance employees pick up
their parts and supplies as needed and are required to fill out
a requisition sheet listing the quantity and type of supply
taken. However, he said this was not always properly done
because maintenance personnel in many cases could be in
a hurry and inadvertently write down the wrong part
number or the incorrect quantity taken, or forget to prepare
the requisition sheet in their haste to get back to the job site.

Additionally, the Authority replaced its inventory computer
software early in 1996 and the new software had some
problems. The system was not accurately reporting the
information entered. Requisitioned parts were not being
subtracted from the total as they were entered into the
inventory records. This impacted the accuracy of the
inventory report because the quantity of parts were
overstated.

Because the warehouse is left unlocked and in many
instances unmanned during normal business hours, it is
difficult to determine the exact causes of the inaccurate
inventory report. Theft may be occurring and it may go
unchecked simply because the shortages are not followed
up on. The fact that there is not a parts person or someone
at the warehouse at all times leaves the parts and supplies at


         Page 27                                    97-CH-202-1001
Finding 3



                             risk. Access to the warehouse is not restricted nor is there
                             any type of sign-in-sheet for people entering and leaving
                             the warehouse.

                             The Authority's Executive Director acknowledged that the
                             warehouse lacked controls, but she believed there had never
                             been any theft of any consequence. Also, the overall value
                             of the inventory is relatively low. The Maintenance
                             Superintendent also said some theft of parts may have
                             occurred, but felt it was very minor, and not a real concern
                             to the Authority.

                             The Authority did not properly record inventory to its
 The Authority did not
                             general ledger. The parts and supplies purchased are not
 properly record inventory
                             recorded as an asset in the general ledger but rather are
                             recorded as an operating expense in the general ledger. The
                             general ledger does not show the actual balance of
                             inventory on hand, except at year end. At year end, the
                             general ledger is adjusted to reflect the value of the year end
                             inventory count.

                             The Authority did not reconcile differences between its
 Differences between the
                             "Inventory By Part Number With Costs Report" and the
 inventory count and
                             actual year end physical inventory count. Discrepancies
 Authority records were
                             between the actual physical count and the inventory records
                             were not analyzed. According to the Executive Director,
                             there has never been any type of reconciliation made to
                             reflect the difference between the year end physical
                             inventory count and the books and records. The Authority
                             has recorded inventory this way for many years and this
                             was the way the Executive Director said she had been
                             instructed to record the inventory.

                             Without a reconciliation being performed, the loss of
                             inventory due to theft, waste, or misuse cannot be
                             determined, nor can the overall management of the
                             warehouse be effectively evaluated.

                             The Authority's Executive Director said there were no
 The Authority lacked
                             written procedures for controlling the warehouse inventory.
 written policies and
                             The Authority did not have policies and procedures for
                             properly conducting a year end physical count, accounting
                             for inventory as it is received, reconciling the physical
                             inventory count with the book records, following up on


97-CH-202-1001                       Page 28
                                                                     Finding 3



                   differences between the books and actual count, or properly
                   maintaining records of inventory on hand.



Auditee Comments   Excerpts from the Executive Director's comments on our
                   draft finding follow. Appendix B contains the complete
                   text of her comments.

                   The Authority agrees that the computerized report does not
                   agree with the physical count of the inventory. The
                   Authority will ensure more accurate recording of
                   requisitions and purchases. The more accurate recording of
                   requisitions and purchases shall be addressed in our policies
                   and procedures.

                   The Authority's inventory records have been somewhat
                   inaccurate which is contributed to by the lack of warehouse
                   controls. By controlling the access to the inventory with
                   locked doors, requiring accurate part/supply descriptions
                   along with part/supply numbers and educating the staff of
                   their role in obtaining a more controlled inventory, the
                   Authority anticipates a more accurate inventory.

                   The Authority has recorded the inventory as an expense and
                   adjusted the general ledger at year end to reflect the
                   inventory amount. The Authority acknowledges that this is
                   not the correct procedure and will at the start of the new
                   fiscal year begin recording the purchases as inventory and
                   record the parts and supplies as expenses as used. The
                   Authority will be using the perpetual inventory method.

                   Beginning with this year end, the Authority will reconcile
                   the differences in the inventory report and the physical
                   count and will properly record the difference. This proper
                   reconciliation will also allow the Authority to analyze the
                   differences and evaluate why the differences occurred.

                   The Authority does not have written policies and
                   procedures for controlling the inventory. The Authority is
                   in the process of writing policies to control the inventory
                   and will soon have the procedures into effect.




                           Page 29                                  97-CH-202-1001
Finding 3




Recommendations   We recommend that the Director of Public Housing, Illinois
                  State Office, assure that the Franklin County Housing
                  Authority:

                  3A.    Properly uses the current computerized inventory
                         system to control inventory and ensure that any
                         required adjustments are made.

                  3B.    Controls the inventory through physical safeguards
                         or barriers such as a locked door and employee sign
                         in sheets.

                  3C.    Updates the general ledger inventory accounts at
                         least monthly.

                  3D.    Annually reconciles and explains differences
                         between the annual physical inventory count, the
                         "Inventory by Part Number With Costs Report", and
                         the general ledger.

                  3E.    Establishes policies and procedures which outline
                         the proper steps required to control the inventory.




97-CH-202-1001            Page 30
                                                                                        Finding 4




The Authority Lacked Adequate Controls Over
      Its Tenant Accounts Receivables
The Franklin County Housing Authority lacked adequate controls over its tenant accounts
receivable balances. The Authority did not: (1) enforce collection of former tenant accounts on
a consistent basis; and (2) obtain approval from the Board of Commissioners to write off
delinquent accounts. We attribute these deficiencies to a lack of written policies and procedures
governing the tenant accounts receivable process. As a result, the Authority cannot assure HUD
that its tenants were receiving fair and equitable treatment and that collection efforts were
adequate.



                                     HUD Handbook 7511.1 Chapter 11, Section 1, Part 12(a)
 HUD Requirements
                                     states that the accounts of tenants which are considered
                                     uncollectible after all means of collection have failed may
                                     be written off as collection losses. The write offs of tenant
                                     accounts receivables must be approved by the Board of
                                     Commissioners.

                                     Section 309 of the Annual Contributions Contract requires
                                     the Authority to maintain complete and accurate books and
                                     records.

                                     The Authority did not establish a formal rent collection
 The Authority did not
                                     policy for delinquent former tenant accounts. The
 actively pursue tenants'
                                     Authority's unwritten policy was to notify the former tenant
 accounts
                                     in writing of amounts due. After three notifications are sent
                                     at 14-day intervals, the Authority was to refer the
                                     delinquent accounts to its attorney for collection. However,
                                     the Authority did not follow its own unwritten policy.

                                     The Authority's Accounts Receivable Specialist is
                                     responsible for the collection of delinquent accounts. The
                                     Authority's Social Advisor is responsible for tracking the
                                     accounts that are forwarded to its attorney for collection.

                                     The Authority failed to actively pursue collection from
                                     former tenants. We reviewed files of 53 former tenants
                                     with delinquent balances. The Accounts Receivable
                                     Specialist said the Authority sends the tenants a letter after



                                             Page 31                                   97-CH-202-1001
Finding 4



                 they move informing them of the balance owed. However,
                 the Authority did not have a policy specifying when the
                 letters should be sent. We considered timely notification to
                 be within 30 days of vacating the Authority. The Authority
                 failed to promptly send letters to nine of the 53 former
                 tenants informing them of the balance owed to the
                 Authority. The number of days ranged from 33 days to 63
                 days.

                 The Accounts Receivable Specialist said she sends three
                 letters to the tenants. If the Authority has not received a
                 response after she sends the three letters, she forwards the
                 account to the Social Advisor who will send the account to
                 the Authority's attorney for collection. However, the
                 Authority did not consistently follow this policy. The
                 following table shows the number of letters requesting
                 payment that were sent to delinquent former tenants prior to
                 collection or referral to the attorney:



                                    Number of          Number of
                                    Letters Sent        Tenants
                                       0                 32
                                       1                  2
                                       2                  1
                                       3                  6
                                       4                  6
                                       6                  1
                                       7                  3
                                       8                  1
                                      15                  1


                 The Authority did not make referrals of delinquent accounts
                 to its attorney in a timely manner. We considered 60 days
                 as a reasonable time period from the date the tenant moves
                 to the date that the account should be forwarded to the
                 attorney. Our basis is that the Authority should know


97-CH-202-1001           Page 32
                                                                              Finding 4



                           within 60 days the likelihood of collection. Of the 53 files
                           reviewed, only eight were referred to the attorney in a
                           timely manner. The attorney could not find one file that the
                           Authority referred to him. For the remaining 44 tenant
                           files, it took the Authority from 64 days to 327 days to refer
                           the files to its attorney as follows:



                                             Number of      Number of
                                               Days          Accounts
                                             64 days to
                                             100 days          11
                                             101 days to
                                             199 days          29
                                             200 days to
                                             327 days          4


                           The Social Advisor does not keep a listing of accounts that
                           are sent to the attorney. The only documentation kept is in
                           the respective tenant files. The Authority did not maintain
                           documentation for 12 delinquent tenant accounts which
                           showed that the accounts were sent to the attorney for
                           collection. However, the Authority's attorney provided us
                           with documentation showing he received 11 of the
                           delinquent accounts.         He was unable to provide
                           documentation for the remaining one delinquent account.

                           Without formal policies in place, guidelines do not exist to
                           determine when a delinquent account should be written off
                           or when the delinquent account should be forwarded to the
                           attorney's office for collection. Consequently, the tenants
                           cannot be assured that they are receiving fair and equitable
                           treatment.

                           The Authority did not obtain the Board of Commissioners
Tenant accounts were
                           approval to write off uncollectible tenant accounts
written off without
                           receivables. The Executive Director said the Authority did
approval of the Board of
                           not obtain the Board of Commissioners' approval to write
Commissioners
                           off the tenant accounts receivables because she thought it
                           was not necessary.


                                   Page 33                                   97-CH-202-1001
Finding 4



                   From 1993 to 1995, the Authority wrote off the following
                   amounts:



                                     Year     Amount Written Off
                                     1995            $27,723
                                     1994            $12,101
                                     1993            $23,217


                   The Executive Director said the large write off of tenant
                   accounts in 1995 resulted primarily from tenants who did
                   not report their true income. As a result, the Authority
                   charged retroactive rent. The Executive Director said most
                   of the tenants moved rather than pay the Authority the full
                   amount.

                   The Authority wrote off tenant accounts without
                   documenting the collection efforts made on the accounts.
                   In 32 out of the 53 tenant files we reviewed, there was no
                   documentation to support the type of collection efforts
                   made by the Authority prior to writing off the account. For
                   example, two tenants moved from the Authority in
                   December 1995 owing a total of $1,361 and another tenant
                   moved from the Authority in November 1995 owing a total
                   of $382. The Authority wrote off all three accounts in
                   December 1995; however, the Authority's tenant files had
                   no documentation to support any type of collection efforts
                   made by the Authority prior to the writeoffs.



Auditee Comments   Excerpts from the Executive Director's comments on our
                   draft finding follow. Appendix B contains the complete
                   text of her comments.

                   Although the Authority does not have written policies to
                   pursue vacated tenant accounts the Authority does pursue
                   them.

                   The Executive Director randomly selected and reviewed 28
                   of the 53 files reviewed by the OIG. While reviewing the


97-CH-202-1001             Page 34
                                                                       Finding 4



                    files it was apparent that there are circumstances that causes
                    the Authority not to follow their verbal policy. For
                    example:

                    (1) If the Authority does not have a forwarding address the
                        file is not sent to the attorney for collection until all
                        resources to obtain the forwarding address has been
                        exhausted.

                    (2) If the tenants file had already been forwarded to the
                        attorney for non-payment of rent - three letters are not
                        sent since it seems obvious that if they didn't pay while
                        living there, they will not pay once they move out.

                    (3) If the Authority sends the three letters and then a
                        payment is made then the Authority sends three letters
                        again before forwarding it to the attorney.

                    When taking all these circumstances into consideration it is
                    obvious why the number of letters mailed prior to being
                    sent to the attorney and the referral time would vary.

                    The Authority does not see the significance of the master
                    list of accounts other than for convenience.

                    The Authority did fail to present the written off accounts to
                    the Board of Commissioners for their approval. The
                    Authority will do so in the future.


OIG Evaluation of   We recognize that there may be extenuating circumstances
Auditee Comments    involved in pursuing collections from former tenants.
                    However, development and implementation of written
                    procedures addressing such circumstances would help
                    ensure that employees consistently follow the Authority's
                    procedures.

                    A master listing of tenants who are referred to the
                    Authority's attorney is more than a convenience tool. Such
                    a listing would facilitate the tracking of tenant cases. A
                    master listing would also provide the Authority with readily
                    available information regarding the effectiveness of
                    attorney referrals as a collection tool.



                            Page 35                                   97-CH-202-1001
Finding 4




Recommendations   We recommend that the Director of Public Housing, Illinois
                  State Office, assure that the Franklin County Housing
                  Authority:

                  4A.    Develops and implements written policies and
                         procedures for the collection and write off of
                         delinquent tenant accounts.

                  4B.    Obtains the Board of Commissioners approval on
                         future write offs of tenant accounts receivable
                         balances.

                  4C.    Maintains a master listing of accounts sent to the
                         Authority's attorney's for collection. The listing
                         should include: (1) the date sent to the attorney; (2)
                         the amount of the delinquent balance; and (3) the
                         amount recovered, if applicable.




97-CH-202-1001            Page 36
Internal Controls
In planning and performing our audit, we considered the internal controls of the Franklin County
Housing Authority to determine our auditing procedures and not to provide assurance on internal
controls. Internal controls consist of the plan of organization, methods, and procedures adopted
by management to ensure that resource use is consistent with laws, regulations, and policies; that
resources are safeguarded against waste, loss, and misuse; and that reliable data are obtained,
maintained, and fairly disclosed in reports.



                                     We determined the following internal controls were
 Relevant internal controls
                                     relevant to our audit objectives:

                                     •   Management philosophy and operating style.

                                     •   Oversight body.

                                     •   Methods of assigning authority.

                                     •   Management monitoring methods.

                                     •   Completeness of accounting systems.

                                     •   Segregation of duties.

                                     •   Safeguards over access to and use of assets and records.

                                     •   Independent verifications and reconciliations.

                                     •   Policies and procedures.

                                     We assessed all the relevant controls identified above.

                                     It is a significant weakness if internal controls do not give
 Significant weaknesses
                                     reasonable assurance that resource use is consistent with
                                     laws, regulations, and policies; that resources are
                                     safeguarded against waste, loss, and misuse; and that
                                     reliable data are obtained, maintained, and fairly disclosed
                                     in reports.

                                     Based on our review, the following items are significant
                                     weaknesses:




                                              Page 37                                 97-CH-202-1001
Internal Controls



                    •   Management monitoring methods. The Authority did
                        not properly administer the Public Housing Drug
                        Elimination Program (see Finding 2).

                    •   Completeness of accounting systems. The Authority
                        did not properly record inventory to its general ledger
                        (see Finding 3).

                    •   Segregation of duties. The Authority lacked adequate
                        controls over its cash receipts (see Finding 1).

                    •   Safeguards over access to and use of assets and records.
                        The Authority lacked adequate controls over its cash
                        receipts (see Finding 1).

                    •   Independent verifications and reconciliations. The
                        Authority did not adequately reconcile its cash
                        collections (see Finding 1) and its inventory differences
                        (see Finding 3).

                    •   Authority policies and procedures. The Authority
                        lacked adequate controls over its cash receipts (see
                        Finding 1), its inventory (see Finding 3), and its tenant
                        accounts receivables (see Finding 4).




97-CH-202-1001              Page 38
Follow Up On Prior Audits
This is the first OIG audit of the Franklin County Housing Authority.

The Authority's last Single Audit Report was for the Fiscal Year ended December 31, 1994. The
report contained no findings.




                                            Page 39                              97-CH-202-1001
Follow Up On Prior Audits




                    (THIS PAGE LEFT BLANK INTENTIONALLY)




97-CH-202-1001                      Page 40
                                                                                     Appendix A

Schedule of Unsupported Costs
                             Recommendation             Unsupported
                                 Number                    Costs
                                  2A                    $23,342
                                  2B                    14,856
                                  2C                     8,271
                                TOTAL                   $46,469


Unsupported costs are costs charged to a HUD-financed or insured program or activity and
eligibility cannot be determined at the time of the audit. The costs are not supported by adequate
documentation or there is a need for a legal or administrative determination on the eligibility of
the costs. Unsupported costs require a future 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.




                                              Page 41                                 97-CH-202-1001
Appendix A




                 (THIS PAGE LEFT BLANK INTENTIONALLY)




97-CH-202-1001                   Page 42
                                                                                       Appendix B

Auditee Comments

August 28, 1996

Mr. Richard Urbanowski
Senior Auditor
Department of Housing and Urban Development
Office of Inspector General
77 W. Jackson Blvd., Suite 2646
Chicago, Illinois 60604-3507

RE:    Finding resulting from the review of the Cash Receipts

Mr. Urbanowski:

Please find enclosed the Franklin County Housing Authority's response to the above mentioned
finding.

I will at this time extend my apologies for taking over the ten days to respond. Due to the length
of this finding and the information contained I wanted to assure that we were thorough with our
response. I will try to be more prompt on our future replies.

If any further information is needed or you have any questions, please feel free to call me at (618)
932-2124.

Sincerely,

Monica Stewart
Executive Director




                                               Page 43                                  97-CH-202-1001
Appendix B



Employees cashed their personal checks from Authority funds.

The Authority acknowledges that personal checks have been cashed in the past. On or about the
week of May 6, 1996 the OIG discussed this practice with the Executive Director. The Executive
Director explained that this had been practiced the last 15 years.

Since the Authority acknowledged the fact that personal checks were being cashed and took
measures to stop, the Authority questions the significance of summarizing the activity. But since
the activity was summarized the Authority will attempt to further explain the "Miscellaneous" and
"Unknown" amounts. The "Miscellaneous" amount contains $1034.78 in checks cashed by the
Former Accounts Receivable employee. After reviewing the deposit tickets it appears that the
majority of the "Unknown" amount is also employee checks that were cashed.

The Executive Director issued a written memo to all employees on May 9, 1996 explaining that
personal checks would no longer be cashed. The issue of cashing personal checks is being
addressed in the Financial Management Policy.

Cash rent collections were used to reimburse the petty cash fund.

The checks issued to reimburse petty cash were cashed from Authority funds. This practice is
similar to the cashing of personal checks. This practice is no longer being used and will also be
addressed in the Financial Management Policy.

Bank deposits were not made timely.

The Authority acknowledges that some deposits were made late. Presently deposits are being
made more timely. The Authority is in the process of instituting a daily written reconciliation and
daily deposits. The Authority will continue to maintain two cash drawers and is in the process
of obtaining new cash drawers that will be more secure and fireproof. The Financial
Management Policy will also address the placing of the cash drawers in the vault and keeping the
drawers locked.

The Authority did not follow up on cash overage and shortages.

The Authority did not require daily reconciliations of the cash drawers. At the beginning of the
month when the rent collections are the highest deposits are generally made daily. After around
the tenth of the month when cash collections decrease deposits may be made weekly.

The Authority did follow-up on overages and shortages of the deposits. During the period of
January 1994 to July 1996 there were 986 deposits made at First Bank West Frankfort, which is
the Authority's main financial institution. Of the 986 deposits that were made there were
approximately 12 errors made. Although we attempt to have no errors, the fact that there were
12 out of 986 we do not feel that this is excessive. When an error occurred the error was
corrected on the next deposit.


97-CH-202-1001                                Page 44
                                                                                    Appendix B



When a deposit was made the drawers were reconciled. The Executive Director expressed her
concern to the OIG that the terms being used by the Authority staff and the OIG staff regarding
the reconciliation and deposits was not necessarily the same. Our process has been: when a
deposit is made the Accounts Receivable Specialist and the Leasing and Occupancy Specialist
count the remaining cash to verify the $250.00 balance and therefore the drawer is reconciled.
The Authority has not made a deposit without reconciling the drawer. The Authority has not
made a reconciliation of the cash drawer without making a deposit. In the Financial Management
Policy the Authority will address the procedure for daily reconciliations and the criteria for
making a deposit.

Cash drawer reconciliations were not properly performed.

The Authority acknowledges that it has been lax in reconciling cash drawers, as previously noted.
Again this will be addressed in the Financial Management Policy.

The cash shortage identified during the OIG cash count had to occur the day the cash was
collected or after the deposit was made on the previous day. A deposit was made on the previous
day. Both the Accounts Receivable Specialist and the Leasing and Occupancy Specialist said that
after making their deposits they each count their cash drawers to assure that the drawers are
balanced to $250.00.

The Financial Management Policy will also address the use of daily written reconciliations,

Rent receipt forms were not properly used.

The Authority mails all elderly residents a monthly rent statement, which are not prenumbered.
After the OIG expressed his concern that the statements were not prenumbered, the Authority
began numbering the rent statements before they were mailed. The Authority found that this
created some problems. Some of the statements were not returned when payments were made
(due to them being lost, torn, etc.) therefore the Authority has rent receipt numbers that cannot
be accounted for.

All rent statements are numbered with a duplicate number stamper when the statement is returned
from the bank or when a resident pays their rent. Therefore, all rent statements are numbered at
some point. The Authority does use prenumbered receipts for payments and adjustments. The
voided prenumbered receipts are retained by the Authority and placed in the batches.

Although the Authority has stamped rent statements with receipt numbers and date paid we did
not record what method of payment and who conducted the transaction. The Authority has plans
to obtain software that will generate cash receipts, which will give all the information that is
needed.




                                             Page 45                                 97-CH-202-1001
Appendix B



In the past checks have not been immediately stamped "For Deposit Only". Since approximately
July 1, 1996 we have been stamping checks upon receipt. This procedure will also be addressed
in the Financial management Policy.

Third party checks were not immediately stamped "For Deposit
Only. "

The Authority had failed to stamp third party checks upon receipt. Since approximately July 1,
1996 the Authority has been stamping the checks upon receipt. Again, this procedure will be
addressed in the Financial Management Policy.

Cash receipts duties were not adequately segregated.

The Executive Director does agree that duties should be more segregated, but finds this difficult
because of the size of the Authority staff.

Although the Accounts Receivable Specialist collects rent and posts to the computer, the receipts
with the deposit slip goes to the Section 8 Coordinator to be posted manually and to be batched.
When batching the receipts the Section 8 Coordinator verifies that the receipts balance with the
deposit slip. After batched, the receipts go back to the Accounts Receivable Specialist to be
posted on the computer.

The Authority feels that once computer generated receipts are used it will allow less chance for
any account to be manipulated.

Several employees accepted tenant rent payments.

At the time the Inspector General audit began all administrative staff could accept rent, although
primarily three staff members were accepting rent. The Authority acknowledged that this did not
allow for accountability. Approximately June 1, 1996 the Executive Director informed all staff
that the Leasing & Occupancy Specialist and the Accounts Receivable Specialist would be
accepting rent payments.

Although the Board of Commissioners has not formally adopted a Financial Management Policy,
many procedures have been implemented by the Executive Director and carried out by the staff.
The Executive Director and staff have spent many hours planning how all the procedures can be
properly implemented. Some procedures have been successful. Some procedures have proven
to be unsuccessful, so we are trying something different.

Some of the procedural changes the Authority has implemented since the Inspector General Audit
began includes: no longer cashing personal checks, only two staff members collect rent and
have access to their assigned cash drawers, all deposits are verified by a second party, all deposits
are placed in a locked bank bag by a third party and taken to the bank by a fourth party, and all
checks are stamped "For Deposit Only" upon receipt.


97-CH-202-1001                                 Page 46
                                                                                       Appendix B




September 12, 1996

Mr. Richard Urbanowski
Senior Auditor
Department of Housing and Urban Development
Office of Inspector General
77 W. Jackson Blvd., Suite 2646
Chicago, Illinois 60604-3507

RE:    Finding resulting from the review of the Drug Elimination Program

Mr. Urbanowski:

Please find enclosed the Franklin County Housing Authority's response to the above mentioned
finding.

I will at this time extend my apologies for taking over the ten days to respond. I wanted to assure
that we were thorough with our response. I will try to be more prompt on our future replies.

If any further information is needed or you have any questions, please feel free to call me at (618)
932-2124.

Sincerely,

Monica Stewart
Executive Director




                                               Page 47                                  97-CH-202-1001
Appendix B



The Authority was billed for services not provided.

The Authority was billed for services in which there is no supporting documents. The Authority
will contact the Agency and seek supporting documents for the amount paid. If supporting
documents are not provided the Authority will take necessary steps to re-pay the amount owed
to HUD.

The Authority assures the OIG and Department of HUD that in future grants all contracts and
extensions will be properly executed.

Payments to West Frankfort Police Department were unsupported.

The Authority will ask the West Frankfort Police Department for supporting documents for the
amounts paid. If supporting documents cannot be provided the Authority will take necessary
steps to re-pay the amount owed to HUD.

Again, the Authority assures the OIG and Department of HUD that all future contracts will be
properly executed and funds will not be expended until the contracts are properly executed.

The Authority drew down excess funds for administration costs.

The Authority will seek supporting documents from the former Executive Director for his time
spent on the program.

The Authority did not incur any additional costs for the audit and will return the $2,000 as
requested .

The Authority does anticipate eventually installing the security camera that the funds were
requisitioned for. The Authority is requesting to keep the funds and the camera will be installed
in the very near future.

Contracts did not specifically state the work to be performed.

The Authority assures the OIG and the Department of HUD that all future contracts will be much
more specific as to what is to be provided by the contractors.




97-CH-202-1001                               Page 48
                                                                                       Appendix B




August 9, 1996

Mr. Richard Urbanowski
Senior Auditor
Department of Housing and Urban Development
Office of Inspector General
77 W. Jackson Blvd., Suite 2646
Chicago, Illinois 60604-3507

RE:    Finding resulting from the review of the Inventory of Parts and Supplies

Dear Mr. Urbanowski:

Please find enclosed the Franklin County Housing Authority's response to the above mentioned
finding.

I believe that each issue has been addressed and is to your satisfaction.

If any further information is needed or you have any questions, please feel free to call me at (618)
932-2124.

Sincerely,

Monica Stewart
Executive Director




                                               Page 49                                  97-CH-202-1001
Appendix B



Inventory records were not properly maintained.

The Authority agrees that the computerized report does not agree with the physical count of the
inventory. The Authority has a computerized inventory system that is adequate. The Authority
will ensure more accurate recording of requisitions and purchases. The more accurate recording
of requisitions and purchases shall be addressed in our policies and procedures.

The Authority's inventory record was inaccurate.

The Authority's inventory records have been somewhat inaccurate which is contributed to by the
lack of warehouse controls. The Authority realizes that the ideal situation would be to have an
inventory clerk. Because of our staff size and the low dollar amount of inventory, we do not feel
it is economically feasible to hire an inventory clerk. The Authority does intend to "tighten" the
controls and access to the inventory. By controlling the access to the inventory with locked
doors, requiring accurate part/supply descriptions along with part/supply numbers and educating
the staff of their role in obtaining a more controlled inventory, the Authority anticipates a more
accurate inventory.

The Authority did not properly record inventory to its general
ledger.

The Authority has recorded the inventory as an expense and adjusted the general ledger at year
end to reflect the inventory amount. The Authority acknowledges that this is not the correct
procedure and will at the start of the new fiscal year begin recording the purchases as inventory
and record the parts and supplies as expenses as used. The Authority will be using the perpetual
inventory method. These new procedures will allow the general ledger to more closely reflect
the actual amount of inventory on hand and aid in the reconciliation at year end.

Differences between the inventory count and Authority records
were not reconciled.

The Authority has not reconciled the inventory report generated by the computer to the actual
physical count. Beginning with this year end, the Authority will reconcile the differences in the
inventory report and the physical count and will properly record the difference. This proper
reconciliation will also allow the Authority to analyze the differences and evaluate why the
differences occurred.

The Authority lacked written policies and procedures.

The Authority does not have written policies and procedures for controlling the inventory. The
Authority is in the process of writing policies to control the inventory and will soon have the
procedures into effect.




97-CH-202-1001                                Page 50
                                                                                       Appendix B




September 18, 1996

Mr. Richard Urbanowski
Senior Auditor
Department of Housing and Urban Development
Office of Inspector General
77 W. Jackson Blvd., Suite 2646
Chicago, Illinois 60604-3507

RE:    Response to the Finding that The Housing Authority Lacked Adequate Controls Over Its
       Tenant Accounts Receivables.

Mr. Urbanowski:

Please find enclosed the Franklin County Housing Authority's response to the above mentioned
finding.

If any further information is needed or you have any questions, please feel free to call me at (618)
932-2124.

Sincerely,

Monica Stewart
Executive Director




                                               Page 51                                  97-CH-202-1001
Appendix B



The Authority did not actively pursue tenants' accounts.

Although the Authority does not have written policies to pursue vacated tenant accounts the
Authority does pursue them.

The Executive Director randomly selected and reviewed 28 of the 53 files reviewed by the OIG.
While reviewing the files it was apparent that there are circumstances that causes the Authority
not to follow their verbal policy. For example:

1) If the Authority does not have a forwarding address the file is not sent to the attorney for
   collection until all resources to obtain the forwarding address has been exhausted.

2) If the tenants file had already been forwarded to the attorney for non-payment of rent - three
   letters are not sent since it seems obvious that if they didn't pay while living there, they will
   not pay once they move out.

3) If the Authority sends the three letters and then a payment is made then the Authority sends
   three letters again before forwarding it to the attorney.

When taking all these circumstances into consideration it is obvious why the number of letters
mailed prior to being sent to the attorney and the referral time would vary.

The Authority does not see the significance of the master list of accounts other than for
convenience.

Tenant accounts were written off without approval of the Board of
Commissioners.

The Authority did fail to present the written off accounts to the Board of Commissioners for their
approval. The Authority will do so in the future.




97-CH-202-1001                                 Page 52
                                                                        Appendix C

Distribution
Secretary's Representative Midwest
Director, Public Housing Division, Illinois State Office (2)
Director Accounting Division, Midwest
Field Controller, Midwest
Assistant General Counsel, Midwest
Public Affairs Officer, Midwest
Assistant to the Deputy Secretary for Field Management, SC (Room 7106)
Acquisitions Librarian, Library, AS (Room 8141)
Deputy Chief Financial Officer for Operations, FO (Room 10166) (2)
Chief Financial Officer, F (Room 10166) (2)
Director, General Management Division, PMG (Room 4216)
Comptroller/Audit Liaison Officer, PF (Room 4122) (3)
Associate General Counsel, Office of Assisted Housing and Community Development, GC
(Room 8162)
Assistant Director in Charge, U.S. GAO, 820 1st St. NE, Union Plaza, Building 2,
 Suite 150, Washington DC, 20002 (2)




                                       Page 53                           97-CH-202-1001