We performed a review of the U.S. Department of Housing and Urban Development’s (HUD) oversight of public housing agencies’ unrestricted and restricted Section 8 administrative fee reserves. We initiated this review because in our audits of two housing authorities, neither agency was able to clearly account for its administrative fee reserve funds and demonstrate that they were used appropriately. Our objective was to determine whether HUD had policies, procedures, and controls in place to ensure that public housing agencies properly accounted for their administrative fees and used them for their intended purpose.

We found that HUD lacks the necessary policies, procedures, and controls to ensure agencies segregate restricted and unrestricted Section 8 program fees. HUD assumed that public housing agencies maintained adequate accounting systems to track and separately account for unrestricted and restricted administrative fee reserves. As a result, HUD could not be assured that administrative fee reserves were tracked and used properly.

We recommend that the Deputy Assistant Secretary for Public Housing (1) develop and implement detailed policies, procedures, and controls to ensure that public housing agencies properly account for their administrative fees and use them in compliance with HUD rules and regulations. This recommendation includes requiring the public housing agencies to separately account for unrestricted reserves so that unrestricted and restricted reserves may be more clearly identified, (2) consider requesting the Real Estate Assessment Center add an extra line item in the Financial Assessment Subsystem to capture the unrestricted and restricted administrative fee reserves to better track those balances, and (3) require public housing agencies to perform a reconciliation of their administrative fee reserves to determine the correct balances in their restricted and unrestricted accounts. These amounts will be recognized as the beginning/ending balances in the Financial Assessment Subsystem.