The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited the Cincinnati Metropolitan Housing Authority's (Authority) Section 8 Housing Choice Voucher program (program). The audit was part of the activities in our fiscal year 2008 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. This is the second of three planned audit reports on the Authority's program.

The Authority's program administration regarding housing assistance payments calculations, documentation to support households' eligibility for housing assistance, and its Section 8 project-based certificate contract was inadequate. The Authority incorrectly calculated households' payments resulting in more than $44,000 in overpayments and more than $11,000 in underpayments for the period July 2006 through August 2008. Based on our statistical sample, we estimate that over the next year, HUD will overpay more than $925,000 in housing assistance and utility allowances.

The Authority also did not ensure that its households' files contained the required documentation to support its housing assistance and utility allowances. Of the 111 files statistically selected for review, 31 did not contain documentation required by HUD and the Authority's program administrative plan to support nearly $216,000 in housing assistance and utility allowance payments.

The Authority failed to appropriately manage its Section 8 project-based certificate contract. It improperly received more than $87,000 in program administrative fees for 51 months while it made housing assistance payments for units without valid housing assistance payments contracts, including payments for 20 months to an owner that notified the Authority that it did not want to renew its contract.

We informed the Authority's executive director and the Director of HUD's Cleveland Office of Public Housing of a minor deficiency through a memorandum, dated May 1, 2009.

We recommend that the Director of HUD's Cleveland Office of Public Housing require the Authority to reimburse its program from nonfederal funds for the improper use of more than $135,000 in program funds, provide documentation or reimburse the applicable program nearly $238,000, and implement adequate procedures and controls to address the finding cited in this audit report to prevent more than $925,000 in program funds from being spent on excessive housing assistance and utility allowances over the next year.