Support or reimburse the project $70,632 from nonproject funds, as appropriate, for the project funds disbursed to Vesta Corporation for bookkeeping fees without documentation showing that the bookkeeping fees charged were reasonable.

Implement adequate procedures and controls, including but not limited to ensuring that the project receives HUD’s communications to ensure that its management and bookkeeping fees comply with HUD’s requirements.

Implement adequate procedures and controls to ensure that its bookkeeping fees are based on actual costs.

Use the project’s security deposits bank account to deposit and disburse security deposits.

Ensure that $1,385,791 ($1,229,684 in housing assistance payments and $156,107 in associated administrative fees) used by the Lexington-Fayette Urban County Housing Authority is supported through a valid and retroactive exemption from HUD’s third-party requirements. If a retroactive exemption cannot be issued, HUD should follow recovery procedures prescribed in HUD Handbook 2000.06, REV-4.

Revise the standard MTW agreement for all existing 39 MTW housing agencies to clearly and specifically support which provision(s) waive the third-party inspection requirements.

Issue clarifying guidance to all existing 39 MTW housing agencies advising that HUD intended to waive the third-party inspection requirements via attachment C to the standard agreement.

Ensure that reviews of MTW annual plans are thorough by verifying that the MTW plan accurately identifies the appropriate exemptions as authorized in the MTW agreements.

Verify that the Office of Public Housing Investments’ approvals of all MTW public housing agencies’ MTW plans’ exemptions from HUD’s third-party requirements were valid and appropriate.

Require the Authority to reimburse its Public Housing Capital Fund program $38,411 from nonproject funds for the inappropriate use of funds for the Section 8 Project-Based Voucher Program units.

Ensure that the Louisville, KY, PIH field office sends to the Office of Recapitalization any requests it receives for approving capital funds expenditures after the RAD conversion is complete.

Require the Authority to ensure that capital funds are used in accordance with the program requirements for any future RAD conversions.

We recommend that the Director of HUD’s Newark Office of Public and Indian Housing require the Authority to certify, along with the owners of the 25 units cited in the finding, that the applicable housing quality standards violations have been corrected.

We recommend that the Director of HUD’s Newark Office of Public and Indian Housing require the Authority to reimburse its program $111,651 from non-Federal funds ($110,943 for housing assistance payments and $708 in associated inspection service fees) for the 23 units that materially failed to meet HUD’s housing quality standards.

We recommend that the Director of HUD’s Newark Office of Public and Indian Housing require the Authority to improve controls over its inspection program to ensure compliance with HUD guidelines and that the results of those inspections are used to enhance the effectiveness of its housing quality standards inspections.

We recommend that the Director of HUD’s Newark Office of Public and Indian Housing require the Authority to reimburse its program $4,459 from non-Federal funds for housing assistance payments that should have been abated for units that did not meet housing quality standards.

We recommend that the Director of HUD’s Newark Office of Public and Indian Housing require the Authority to improve controls to ensure that its staff accurately calculates housing assistance payment abatements.

Implement adequate procedures and controls to ensure that it obtains and reviews source documentation, such as invoices and time sheets, to support that expenses are eligible before providing Block Grant funds to the corporation for housing repair services.

Reimburse its Block Grant program from non-Federal funds for the $5,810 it provided to the corporation for labor that exceeded actual labor costs (more than $4,800) and indirect costs associated with the excessive labor costs (nearly $1,000).

Review the labor costs associated with the remaining 1,645 (1,668 - 23 reviewed) jobs that we did not review to determine whether the Block Grant funds it provided the corporation for labor exceeded the actual labor costs for each job. If the labor exceeded the actual labor cost for a job, the County should reimburse its Block Grant program from non-Federal funds for the excessive labor costs and the indirect costs associated with the excessive labor costs that the County provided to the corporation.