Freeport Housing Authority Didn’t Properly Administer Low-Rent Housing Program

HUD audited the Freeport Housing Authority’s administration of its low-rent housing and homeownership programs. The authority owns and operates 352 low-rent housing units, which are located in two scattered-site properties and three developments in Freeport, N.Y. The authority received approximately $2.3 million in public housing operating and capital fund subsidies for fiscal years 2012 and 2013.

HUD designated the authority “financially substandard” for the fiscal year ending Dec. 31, 2011, because officials didn’t submit audited financial statements by the established deadline. HUD officials have actively worked to improve the authority’s overall performance and are negotiating the terms of the proposed HUD recovery agreement and draft action plan to help the authority become a standard or high performer.

The objective of the audit was to determine whether the authority administered its low-rent housing and homeownership program in accordance with HUD’s regulations.

What Auditors Found

HUD’s Office of Inspector General (OIG) determined that the authority didn’t administer its low-rent housing and homeownership programs in accordance with HUD’s regulations.

No adequate records to support the proper procurement of services. This deficiency occurred because former authority officials were either unaware of or chose to disregard HUD’s procurement regulations and the authority’s procurement policy. As a result, there were no assurances that: (1) services such as landscaping, legal, security, and staffing services were procured in a manner that provided full and open competition; (2) independent cost estimates were obtained; and (3) procurements were efficient and economical.

Noncompliance with admissions and occupancy administrative requirements. Officials didn’t update the waiting lists at least annually and maintain complete and accurate records demonstrating the proper selection of applicants from these lists. Also, they didn’t always use Enterprise Income Verification system reports in a timely manner to confirm the accuracy of the income tenants reported. They didn’t conduct reviews of flat rents and reexaminations of income and family composition at least annually, nor did they conduct annual unit inspections.

Inconsistent financial and general administrative practices with HUD requirements. Former authority officials didn’t properly document the allocation of $262,849 in salaries and other costs among various programs, obtain HUD’s approval to settle a lawsuit for $8,000, accept only full rental payments, deposit rents from a scattered-site property into the authority’s general fund, change account signatories to reflect current authority officials, use a petty cash journal to track disbursements, obtain full flood insurance coverage, install all replacement windows purchased with federal funds, and maintain inventory records and all board meeting minutes and resolutions.

Auditor’s Recommendations

OIG recommended that the Director of HUD’s New York Office of Public Housing require authority officials to: (1) implement controls to ensure that the emergency procurement procedures in the authority’s procurement policy comply with federal regulations and are consistently followed; (2) maintain records to show the proper selection of applicants from the authority’s waiting lists; and (3) develop and implement financial controls to ensure the proper allocation and disbursement of funds.

• Freeport Housing Authority: Audit Report Number 2015-NY-1002, December 2014