We audited the Michigan State Housing Development Authority’s multifamily project-based Section 8 program for new-regulation projects as part of the activities in our fiscal year 2013 annual audit plan. We selected the Authority based on a referral from U.S. Department of Housing and Urban Development (HUD) management. Our objective was to determine whether the Authority administered its program in accordance with HUD’s requirements.
The Authority did not comply with HUD’s requirements regarding the administration of its multifamily project-based Section 8 program for new-regulation projects. Specifically, it failed to use program residual receipts to reduce or offset housing assistance payments for new-regulation projects. As a result, nearly $31.6 million in unused or excess project funds was not available for HUD to offset future subsidy expenditures.
The Authority did not remit unused or excess funds upon termination of the housing assistance payments contracts for three new-regulation projects. As a result, more than $1.2 million in unused or excess project funds was not available for HUD to achieve program savings.
The Authority inappropriately disbursed replacement reserves for four projects. As a result, more than $290,000 was not available to benefit its multifamily projects. Further, its projects lost more than $175,000 in interest income.
We recommend that the Director of HUD’s Detroit Office of Multifamily Housing Programs require the Authority to (1) ensure that program residual receipts of nearly $31.6 million are used instead of seeking unnecessary housing subsidies; (2) reimburse HUD and the U.S. Treasury more than $1.2 million for the projects with terminated program contracts; (3) reimburse its project’s escrow accounts more than $465,000 for the inappropriate disbursements of replacement reserves; and (4) implement adequate controls to address the findings cited in this audit report.
Recommendations
Housing
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Status2013-CH-1011-001-AOpenClosed$31,148,477.00Funds Put to Better Use
Recommendations that funds be put to better use estimate funds that could be used more efficiently. For example, recommendations that funds be put to better use could result in reductions in spending, deobligation of funds, or avoidance of unnecessary spending.
We recommend that the Director of HUD’s Detroit Office of Multifamily Housing Programs require the Authority to ensure that $31,148,477 in residual receipts for the 15 projects as of May 31, 2013, is used to reduce or offset housing assistance payments in accordance with HUD’s requirements.
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Status2013-CH-1011-002-AOpenClosed$608,337.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
We recommend that the Director of HUD’s Detroit Office of Multifamily Housing Programs require the Authority to reimburse the U.S. Treasury $608,337 ($77,856 436,759 $93,722) for the three projects with terminated program contracts.
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Status2013-CH-1011-002-COpenClosed$12,830.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
We recommend that the Director of HUD’s Detroit Office of Multifamily Housing Programs require the Authority to reimburse the U.S. Treasury $12,830 from non-Federal funds for the lost interest.