PHA Didn't Administer Its Operating and Capital Funds Properly

HUD’s Office of Inspector General (OIG) audited a public housing agency because it was classified as a troubled PHA and based on OIG’s risk analysis of PHAs located in the State of New Jersey. The objective of the audit was to determine whether the PHA administered its operating and capital funds in accordance with HUD requirements.

Auditors found that the PHA didn’t always administer its operating and capital funds in accordance with HUD requirements. Specifically, it: (1) didn’t properly procure goods and services totaling more than $1 million; (2) didn’t support more than $187,000 in capital fund obligations; (3) didn’t meet obligation deadlines for more than $704,000 in replacement housing factor funds and disbursed more than $139,000 after the expenditure deadline; (4) charged its project more than $87,000 in excessive management fees; and (5) didn’t ensure that its budget, financial reports, and accounting data were accurate and up to date.

This condition occurred because the PHA didn’t fully understand HUD’s requirements and didn’t have adequate controls to ensure compliance with all requirements. As a result, HUD didn’t have assurance that the prices paid for capital improvements and professional services were reasonable, capital funds were used for eligible activities in a timely manner, operating funds were available for the operations of the PHA’s project, and it had accurate information for evaluating the PHA.

OIG recommended that HUD require the PHA to: (1) provide documentation to show that more than $1 million paid for goods and services was reasonable; (2) provide procurement training to its staff; (3) provide documentation to support more than $187,000 in 2013 and 2014 capital fund obligations; (4) reimburse HUD $139,423 in replacement housing factor funds disbursed after the expenditure deadline; (5) improve its controls to ensure that funds are obligated and spent in a timely manner; (6) reimburse its project more than $87,000 for excessive management fees; (7) submit a request to revise its budget to reflect expenditures; and (8) improve its controls to ensure that its budget, financial reports, and accounting data are accurate and up to date. Further, OIG recommended that HUD reduce the PHA’s future capital funds as a penalty for obligating its replacement housing factor funds after the deadline.

• HUD Audit 2017-NY-1013