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North Carolina Audit ReportsIssue
Date: September 26, 2007 Title: The Wilmington Housing Authority, Wilmington, NC, Did Not Follow HUD Requirement for its Nonprofit Development ActivitiesAs part of the U.S. Department of Housing and Urban Development (HUD), Office of the Inspector General's (OIG) strategic plan, we audited the Wilmington Housing Authority (Authority) in Wilmington, North Carolina. Our audit objective was to determine whether the Authority violated requirements when it noncompetitively procured services from its affiliate, Housing and Economic Opportunities, Inc., and whether it returned program income to HUD in accordance with its Up-Front Grant Special Warranty Deed. The Authority did not follow requirements for selection of its affiliated nonprofit entity to be a development partner for two of the Authority's development projects. As a result, it inappropriately paid its affiliate more than $296,000 in HOPE VI funds. Also, in violation of its Special Warranty Deed with HUD's Multifamily Property Disposition Center, the Authority inappropriately allowed its affiliate to retain more than $1.2 million in program income it received from home sales. We recommend that HUD require the Authority to (1) repay $296,655 from nonfederal funds to its HOPE VI program, (2) implement procedures to ensure that it follows Notice: PIH-2007-15 for transactions with its affiliate, (3) return to HUD $1.2 million in program income received by its affiliate, and (4) implement procedures to ensure that the affiliate recaptures home sales proceeds and returns the appropriate amount to the Federal Housing Administration insurance fund. We also recommend that the director of the Atlanta Enforcement Center, in coordination with the director of the Multifamily Division, take appropriate administrative action against the Authority and affiliate for not complying with Up-Front Grant Special Warranty Deed requirements. Issue Date: March 9, 2007 Title: The Wilmington Housing Authority, Wilmington, North Carolina, Needs to Improve Internal Controls over Its ProgramsWe audited the Housing Authority of the City of Wilmington to determine whether the Authority inappropriately used federal funds to support other programs or entities in violation of requirements. Our review found that Authority management did not implement adequate internal controls to ensure that program funds were used only for eligible program activities or that costs were properly allocated and supported. Further, the Authority did not have policies governing employee use of Authority vehicles. As a result, in violation of its annual contributions contract (contract) with HUD, the Authority inappropriately used $744,916 in operating subsidies to pay expenses of other federal and nonfederal programs. In addition, the Authority could not support that it appropriately spent more than $880,000 in accordance with requirements. Further, it did not follow Internal Revenue Service requirements to determine and report the value of fringe benefits received by employees from use of employer provided vehicles. Our recommendations include requiring the Authority to (1) repay ineligible costs of $744,916; (2) provide support for more than $880,000 of costs; (3) develop and implement procedures to ensure that program expenditures are eligible and properly supported, thereby putting an estimated $563,908 to better use; and (4) develop and implement policies and procedures governing employee use of Authority-owned vehicles. Issue Date: June 19, 2006 Title: The Housing Authority of the City of Raleigh, North Carolina, Generally Administered Its Housing Choice Voucher Program in Accordance with RequirementsWe reviewed the Section 8 Housing Choice Voucher program of the Housing Authority of the City of Raleigh, North Carolina (Authority), pursuant to a citizen's complaint. The complainant alleged that the Authority mismanaged its Section 8 program by incorrectly determining tenant rent and unit sizes and not leasing or inspecting units in a timely manner. Our objective was to determine whether the complainant's allegations were valid and whether the Authority effectively administered its Section 8 program. The Authority generally administered its Section 8 Housing Choice Voucher program in accordance with requirements; however, it did not always terminate housing assistance payments in a timely manner, paid excess housing assistance payments of more than $7,000; did not conduct all required quality control reviews; and did not properly update some information in the Public and Indian Housing Information Center, a management information system used by the U.S. Department of Housing and Urban Development's (HUD) Office of Public and Indian Housing, which resulted in inaccurate data. We recommend that the director of the Office of Public Housing, Greensboro, North Carolina, require the Authority to •Obtain the balance remaining on the $7,012 in housing assistance overpayments and properly account for the funds as part of its year-end settlement, •Perform quarterly quality control reviews in accordance with HUD requirements and the Authority's policies and procedures, and •Verify tenant data in the management information system upon each family's recertification and include spot checks of data during its quality control reviews. Issue Date: March 30, 2006 Title: The Housing Authority of the City of Winston-Salem, North Carolina, Used More Than $4.9 Million in Operating Subsidies for Other ProgramsWe audited the Housing Authority of the City of Winston-Salem. Our objective was to determine whether the Authority used funds subject to its low-income housing annual contributions contract (contract) for the benefit of other programs or entities without HUD approval. In violation of its contract with HUD, the Authority used more than $4.9 million in operating subsidies to pay expenses of other federal and nonfederal programs. Further, the Authority violated its contract by encumbering assets when it executed a guarantee of payment agreement for a $475,000 loan for an affiliated entity. As a result, the funds were not available for operation or modernization of public housing units, and assets are at risk. The Authority's board of commissioners often was not aware of transactions that occurred because it did not establish control procedures that ensured it was provided necessary financial reports and ensured management fully informed it of Authority activities. Our recommendations include requiring the Authority to repay ineligible costs of $4,976,616 to its public housing fund, establish a procedure that requires the executive director to provide monthly financial documents to the board prior to meetings to assist the board in providing oversight, and obtain release of encumbered assets, thereby putting potentially as much as $475,000 to better use. We also recommend that the director of the Office of Public Housing, Greensboro, North Carolina, determine whether the Authority substantially defaulted on its contract. Issue Date: January 18, 2006 Title: The Housing Authority of the City of Winston-Salem, Winston-Salem, North CarolinaWe audited the Housing Authority of the City of Winston-Salem's (Authority) Section 8 Housing Choice Voucher program. Our audit objective was to determine whether Section 8 units met housing quality standards. Fifty-one of the 67 units we inspected did not meet minimum housing quality standards. Of the 51 units, 26 were in material noncompliance with housing quality standards. As a result, tenants lived in units that were not decent, safe, and sanitary, and HUD made housing assistance payments for units that did not meet standards. We estimate that over the next year, HUD will pay housing assistance payments of more than $6.4 million for units in material noncompliance with housing quality standards. We recommend that HUD require the Authority to inspect the 51 units that did not meet minimum housing quality standards to verify that the landlords took appropriate corrective actions. If appropriate actions were not taken, abate the rents or terminate the tenants' vouchers. We also recommend HUD require the Authority to implement an internal control plan to ensure its Section 8 units meet housing quality standards and inspections meet HUD requirements to prevent an estimated $6.4 million from being spent on units that are in material noncompliance with standards. Date Issued: August 23, 2005 Title: Housing Authority of Winston-Salem, Winston-Salem, North CarolinaAs part of the Department of Housing and Urban Development (HUD), Office of the Inspector General's (OIG) strategic plan, we performed an audit survey of the Housing Authority of Winston-Salem's (Authority) administration of its Section 8 housing choice voucher program. Our survey objective was to determine whether the Authority properly administered the program. This review was limited to tenant eligibility and subsidy calculations, program financial operations, and whether tenants were housed in appropriate sized units. We did not find any significant deficiencies in these areas during this review, thus we did not perform additional audit work in these areas. However, we did find one case where a tenant was authorized a two bedroom unit, but was inappropriately housed in a three bedroom unit. As a result, the Authority overpaid $472 in subsidy for the tenant during our review period. Our review also found that the PIC data pertaining to bedroom sizes was incorrect for all 48 files. We recommend the director of Public and Indian Housing require the Authority to correct tenant information in its database for the 48 tenants identified, and provide assurance it has implemented procedures to ensure tenant bedroom sizes are correctly entered in the future. Date
Issued: June 27, 2005 Title: The Housing Authority of the City of High Point, NCWe completed an audit of the procurement practices of the Housing Authority of the City of High Point, North Carolina (Authority). Our audit objective was to determine whether the Authority solicited and awarded contracts in accordance with procurement regulations and other requirements. We found the Authority paid at least $524,337 from October 1, 2003, through September 30, 2004, without following procurement requirements. This occurred because the Authority did not have adequate internal controls to ensure it procured goods and services in accordance with procurement requirements. As a result, the Authority cannot ensure it received the resulting goods and services at the best price or that it properly used HUD funds to meet its mission of providing safe and sanitary housing. We recommended that the director of the Office of Public Housing (1) require the Authority to develop and implement procurement policies and procedures that ensure future procurements are in accordance with requirements, thus providing assurance that at least $524,337 will be put to better use during the next 12 months; (2) require the Authority to discontinue paying vendors who do not have valid contracts or purchase orders; and (3) monitor the Authority to ensure it complies with procurement requirements and, if necessary, implement appropriate sanctions to ensure compliance. Date Issued: November 19, 2004 Title: Housing Authority of the City of Durham, Durham, NCWe completed an audit of the Durham Housing Authority's (Authority) financial operations and procurement procedures. Our audit objectives were to determine if the Authority's misuse of funds, identified in a prior report, jeopardized its ability to operate its projects in a manner that promotes serviceability, economy, efficiency, and stability, and whether the Authority followed Department of Housing and Urban Development (HUD) procurement regulations when purchasing goods and services. The Authority jeopardized project stability by misusing funds to subsidize operations of Development Ventures, Inc., (DVI) a non-profit subsidiary. The Authority's cash and investments decreased from $2.8 million in 1996 and $800,000 in 2003. For the same period, its accounts receivable balance increased from $400,000 to $4.6 million. As of June 30, 2004, DVI and its related entities owed $4.1 million to the Authority. At its current rate of spending, we estimated the Authority only had enough funds to continue operations for about 7 months. Because the Authority did not implement adequate procurement procedures, it inappropriately spent $6,855,271 for goods and services. Further, the Authority could not support $953,477 spent for goods and services. We believe the Authority can put the remaining unobligated balance of $2.2 million of Capital Funds to better use by developing and implementing improved procurement procedures. Our recommendations include requiring the Authority to devise plans with multiple strategies for resolving both its short-term and long-term financial problems, repay $6,855,271 and provide support for another $953,477. Date Issued: August 2, 2004 Title: Housing Authority of the City of Durham, Durham, North CarolinaThe Authority violated its ACC by inappropriately advancing funds to its related non-profit and other entities. As of September 30, 2003, the Authority had inappropriately advanced at least $1,994,955 from its Conventional Public Housing General Fund. The Authority also violated its Turnkey III Administrative Use Agreement when it inappropriately advanced or failed to require loan repayments totaling at least $2,803,579. Also, the Authority inappropriately guaranteed a $350,000 loan obtained by a Limited Liability Company (LLC) and executed a Promissory Note for a $1.5 million line of credit on behalf of another LLC. The Authority also failed to properly allocate operating costs to other entities. Further, the Authority has not completed several of its development efforts, thus we question its ability to successfully complete its HOPE VI Revitalization Plan. These actions occurred because the Authority Board of Commissioners and management did not establish and implement sufficient controls to monitor activities and ensure transactions adhered to Federal regulations. Additionally, the Board did not adequately fulfill its fiduciary responsibilities to oversee Authority operations, and management disregarded HUD requirements and instructions. These actions reduced funds available to operate and maintain the Authority's conventional public housing and deprived tenants of needed housing. Our recommendations include requiring the Authority to repay $3,454,660, obtain release of any currently encumbered assets, establish adequate controls, and develop and implement an acceptable cost allocation plan. We also recommend HUD continue to perform reviews of all drawdowns of funds until HUD determines the Authority is properly administering its programs, issue a Notice of Substantial Default in accordance with Section 17(C) of the ACC, and take administrative actions against the former Executive Director, Interim Executive Director and Board members. We also recommend HUD perform a comprehensive review of the Authority's capacity and ensure the Authority takes appropriate measures to address any capacity issues to successfully complete activities in accordance with the HOPE VI Grant Agreement and Revitalization Plan. If the review finds the Authority does not have the capacity to complete the activities, or finds the Authority in serious default of the Grant Agreement or regulations, terminate the Grant and recapture the remaining $27,590,236, or current balance, of unused funds. Date Issued: April 28, 2004 Title: Housing Authority of the City of Asheville, Asheville, North CarolinaWe found the Authority violated its ACC with HUD by inappropriately advancing funds and pledging assets for non-Federal development activities. HUD did not approve the development activities. As of September 30, 2002, management had advanced $1,850,833 of public housing funds for development expenses on behalf of the owners of two tax credit developments. The advances reduced funds available to operate and maintain the Authority's conventional public housing and other HUD programs, and resulted in cash flow problems for the Authority. Management further violated its ACC by pledging the Authority's full faith and credit for a $1.3 million letter of credit obtained to fund development activity. In addition, the Authority pledged a $649,140 certificate of deposit as collateral for a loan. The Authority also entered into inappropriate development and guarantee agreements that placed assets at further risk. The guarantee agreements were extremely one-sided in favor of the investors. Further, the Authority did not properly allocate costs attributable to the non-Federal properties. These actions occurred because the Board of Commissioners did not establish sufficient controls to monitor the Authority's development activities and ensure transactions adhered to Federal regulations. Date Issued: July 31, 2003 Title: Citizens Complaint, Mount Airy, North Carolina Housing AuthorityOur review of the Mount Airy North Carolina Housing Authority was in response to a citizen's complaint. We found that some of the citizen's allegations were valid. The Authority allowed: (1) identity-of-interest companies to bid against one another and then allowed losing bidders to perform the work as subcontractors, and (2) did not perform required cost and price analyses, enforce contractor performance, or always obtain a formal contract. Also, the Authority split the cost of one contract into separate contracts to attempt to reduce costs. This occurred because Authority management did not have adequate knowledge of procurement requirements. Also, the Authority allowed the Executive Director and other staff to use Authority-owned vehicles to commute daily between their homes and work without accounting and reporting the taxable employee fringe benefits. This occurred because management was not aware of the IRS requirements. The Authority had taken actions to correct most of the deficiencies; however additional improvements were needed in some areas. HUD and the Authority agreed with our findings and took or agreed to take appropriate corrective actions. Date Issued: January 9, 2002 Title: Northwestern Regional Housing Authority - Public Housing
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