What We Audited and Why

We audited the Saginaw Housing Commission's (Commission) Public Housing Operating Fund program (program). We initiated the audit based on a request from the Detroit Office of Public Housing for the U.S. Department of Housing and Urban Development (HUD). We audit was also part of the activities in our fiscal year 2006 annual audit plan. Our objective was to determine whether the Commission properly used its program funds subject to its annual contributions contract, other agreements, or federal regulations for the benefit of its program residents.

What We Found

The Commission improperly acquired the Saginaw County Fairgrounds property (property), which included a harness raceway, using its program funds. Without required HUD approval, the Commission used nearly $536,000 in program funds to pay for the property's acquisition costs. Because of the Commission's improper use of these funds, its program also lost more than $25,000 in interest income that would have been realized if the funds had been invested. The Commission failed to file a required declaration of trust to evidence its covenant not to convey or encumber the property and to protect HUD's rights and interests. Further, the Commission entered into eight rooftop lease agreements without required HUD approval and did not restrict more than $12,000 in revenue to pay for program expenses. Instead, the revenue paid for inappropriate expenses such as meals and refreshments for its board meetings, appraisal services related to the purchase of the property, and contributions to the mayor of the City of Saginaw's (City) college scholarship fund and other events honoring the City's mayors.

What We Recommend

We recommend that the director of HUD's Detroit Office of Public Housing require the Commission to (1) reimburse its program for the inappropriate use of funds and lost interest income cited in this report, (2) file a declaration of trust on the property if it has not been sold, (3) submit its current rooftop lease agreements to HUD for approval, and (4) implement adequate procedures and controls to address the findings contained in this report.

We also recommend that the director of HUD's Departmental Enforcement Center pursue administrative sanctions against the Commission's former executive director and its board members involved in the improper purchase of the property.

For each recommendation without a management decision, please respond and provide status reports in accordance with HUD Handbook 2000.06, REV-3.

Please furnish us copies of any correspondence issued because of the audit.