HUD OIG performed a review of selected transactions at the Wilmington Housing Authority (Authority) in conjunction with our review of a citizen’s hotline complaint. Among other concerns, the complainant alleged that the Authority misused U.S. Department of Housing and Urban Development (HUD) funds in conjunction with its purchase of Eastbrook Apartments in September 2005. Our objective was to determine whether the Authority misused HUD funds in its purchase of either Eastbrook Apartments or a tract of vacant land known locally as the “Winfield Smith” property.

The Authority misused $209,938 in HUD Section 8 reserves to make mortgage payments on a non-HUD development, Eastbrook Apartments, and $57,976 in HUD replacement housing factor funds to purchase vacant land. This violation occurred because the Authority’s former management disregarded a HUD directive warning it not to use the Section 8 reserves for mortgage payments and HUD’s requirements regarding the use of replacement housing factor funds. As a result, these funds were not available to assist the Authority’s low-income residents as HUD intended

We recommend that the Director of HUD’s Greensboro Office of Public Housing require the Authority to repay its Section 8 administrative fee reserves $209,938 and its capital fund account $57,976 from non-Federal funds. We also recommend that the Director require the Authority to provide HUD evidence that it has implemented effective controls to better ensure the proper use of HUD funds.