Title: The Portland Housing Authority, Portland, Maine, Did Not Use Reserve Funds or Properly Allocate Employee Costs, Resulting in Questioned Costs of More Than $850,000

We reviewed the Section 8 Housing Choice Voucher program (Voucher program) at the Portland Housing Authority (Authority) as part of our fiscal year 2006 annual audit plan. Our objective was to determine whether the Authority properly administered its Voucher program in accordance with its annual contributions contracts and U.S. Department of Housing and Urban Development (HUD) requirements.

The Authority generally administered its Voucher program in accordance with its annual contributions contracts and HUD requirements. However, it did not use its Section 8 administrative fee reserves in a timely manner or properly allocate salary and employee benefits expense to the Voucher program.

In February 2003, the Authority transferred Section 8 administrative fee reserves to its local programs account, but as of March 2006, it had not used $647,814 of these reserve funds for program or other housing purposes. This occurred because the Authority (1) did not implement its Board resolution donating $550,000 to the Authority's non-profit entity, the Portland Housing Development Corporation (PHDC), (2) lacked specific plans to use available funds, and (3) was unaware that reserve funds must be expended to be considered used. The Authority also undercharged its Voucher program by $158,034 in salary and employee benefits expense because its cost allocation procedures improperly charged the program costs to its Public Housing Capital Fund (Capital Fund) program when the Voucher program had funding shortfalls. The Authority agreed to establish quantifiable and verifiable procedures, which should reduce future Capital Fund program costs by $44,336 during the next 12 months.

We recommend that the director of the Office of Public Housing, Boston, Massachusetts, require the Authority to (1) repay to its Section 8 program the unused portion of $647,814 in administrative fee reserve funds transferred to its local programs account and provide supporting documents for verification of the $158,034 in transferred reserve funds to the Capital Fund program, (2) identify current and valid uses for the remaining Section 8 administrative reserves ($489,780), and (3) establish and implement formal written procedures to properly allocate costs to the benefiting programs, thereby reducing future Capital Fund program expenses by $44,336. In addition, we recommend that HUD verify the repayment of $158,034 to the Authority's Capital Fund program for ineligible administrative expenses.

Issue Date: November 4, 2003
Audit Memorandum No.: 2004-BO-1002
File Size: 532.2KB

Title: Family Living Adult Care Center FHA Project Number 024-22019
Biddeford and Saco, Maine

Our review disclosed that the Family Living project has suffered serious financial problems, including a default on the HUD-insured mortgage, and had ceased being a profitable entity. These problems were caused by questionable cash distributions (withdrawals) from the project bank accounts by the Owner. We consider these distributions, totaling $455,439, to be �equity skimming� and to be in violation of applicable Federal statutes and HUD regulations. By means of these distributions, the Owner diverted project funds from June 2000 to February 2002 to other businesses he owned and for personal expenses.

Issue Date: October 26, 2000
Audit Related Memorandum No.: 01-BO-202-1801
File Size: 42KB

Title: Review of Complaint, Waterville Housing Authority, Waterville, Maine

As requested by the Office of Public Housing, we performed an audit survey of the Waterville Housing Authority's (WHA) Operations. Our objectives were to determine the validity of a complaint identifying six issues brought by a former WHA employee, and to identify any other indicators of problems or deficiencies in WHA's operations, particularly those conditions that may be indicators of fraud, waste and mismanagement.

Our review determined that, of the problem areas identified by the complainant, only one remained unresolved; the controlling and safeguarding of fixed assets. WHA's internal controls in this area are inadequate and need to be improved.

Issue Date: September 25, 2000
Audit Related Memorandum No.: 00-BO-255-1803
File Size: 248KB

Title: Review of Program Recipients' Complaints, State of Maine FIX ME Program, Maine State Housing Authority, Augusta, Maine

In response to several complaints received from program recipients (homeowners), we performed a review of the Maine State Housing Authority's (MSHA) FIX ME Program. Our objective was to evaluate MSHA's administration of the program.

Our review identified deficiencies in the following areas: contractors did not obtain the required local building permits and local building inspections, work write-ups/cost estimates were not prepared by CAP agencies, one CAP agency did not properly document the required inspections of repair work, and MSHA's monitoring reviews of CAP agencies (which administer the day to day operations of the program) were limited in scope and did not disclose the type of problems identified by the complainants. In our opinion, the overall design and structure of the FIX ME Program allowed these problems to occur because of a lack of adequate controls. MSHA needs to improve and standardize their procedures, and establish clear lines of accountability to prevent similar problems from recurring.

Issue Date: June 16, 1999
Audit Report No.: 99-BO-202-1002
File Size: 84KB

Title: Westbrook HA HOPE I Implementation Grant Westbrook, ME

We conducted an audit of the Westbrook Housing Authority in specific relation to its HOPE 1 Implementation Grant Program. The purpose of our review was to determine whether the Housing Authority provided adequate accountability for awarded Federal funds; maintained records which identify the source and application of Federal funds; and carried out its home ownership activities as described in its HUD approved grant application.

Our audit disclosed a significant portion of HUD's HOPE 1 Implementation Grant award of $717,000 to the Housing Authority was not needed to accomplish the goal of home ownership. We found that the Housing Authority is nearing completion of their home ownership program and has sold over 75 percent of the units; however, only 13 percent of grant funds were used toward accomplishing this goal. We further found that the Housing Authority did not use sale proceeds of $420,000 to accomplish stated objectives in their grant application; that grant funds and sale proceeds were commingled with the low income housing general fund; and that such funds were used for unauthorized and unrelated purposes including non-federal assisted housing programs.