The U.S. Department of Housing and Urban Development’s (HUD) Office of Inspector General audited the Chicago Housing Authority’s (Authority) Section 8 Housing Choice Voucher program (program) under its Moving to Work Demonstration program. The audit was part of the activities in our fiscal year 2009 annual audit plan. We selected the Authority based upon our analysis of risk factors relating to the housing agencies in Region V’s jurisdiction. Our objective was to determine whether the Authority administered its program in accordance with HUD’s requirements and its program administrative plan regarding the enforcement of housing quality standards abatement actions and rent reasonableness determinations. This is the fourth of multiple audit reports that may be issued regarding the Authority’s program.

The Authority’s program administration regarding the effectiveness of its abatement process, rent reasonableness determinations, and the recovery of overpayments of housing assistance and utility allowances to multiple owners for a single household was inadequate. Of the 98 program households statistically selected for review, the Authority failed to properly abate program units that failed housing quality standards inspections. As result, it overpaid more than $49,000 in housing assistance and utility allowances and allowed tenants to reside in units that were not decent, safe, and sanitary. Based on our statistical sample, we estimate that over the next year, HUD will pay more than $1.4 million in housing assistance for units that are in a failed status.

The Authority did not properly determine or document the reasonableness of program rents before approving housing assistance contracts and rent increases. It received more than $63,000 in program administrative fees related to the 133 households for which contract rents were inadequately determined to be reasonable. Further, the Authority failed to ensure that owners did not receive multiple housing assistance payments for a single household. Of the 105 households reviewed, 12 owners received more than $64,000 in improper housing assistance and utility allowances.

We informed the Authority’s chief executive officer and the Director of HUD’s Chicago Office of Public Housing of minor deficiencies through a memorandum, dated September 23, 2009.

We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program from nonfederal funds for the improper use of more than $117,000 in program funds, provide documentation or reimburse its program more than $63,000, and implement adequate procedures and controls to address the findings cited in this audit report to prevent more than $1.4 million in program funds from being spent on units that are not in compliance with HUD’s housing quality standards.