We initiated this audit of the City of New London, Connecticut, Housing Authority (the Authority) as part of OIG’s initiative to evaluate public housing authority’s capability to administer the capital funds provided under the American Recovery and Reinvestment Act of 2009 (The Recovery Act). The Authority has had significant management deficiencies for more than ten years and HUD identified the Authority as “overall troubled” in May of 2004. Our objectives were to determine whether the Authority (1) properly administered its Capital Fund program, and (2) has the capacity to administer its Recovery Act capital funds in accordance with HUD requirements and the Recovery Act.

The Authority did not properly administer its Capital Fund program and lacks adequate capacity to ensure that Recovery Act funding for the Capital Fund program will be administered in accordance with HUD requirements and the Recovery Act. The Authority improperly awarded contracts without the Capital Funds to cover the costs; and failed to openly compete procurements and establish formal written contracts with required contract provisions to protect the Authority’s interests. The Authority also did not ensure that contractors paid workers the minimum wage required by law or always ensure that contractors maintained adequate performance bonds and liability insurance. In addition, the Authority did not complete a cost or price estimates to ensure that prices paid were reasonable.

The Authority also lacked formal accounting procedures and has not had an effective financial or capital fund manager since February of 2008. Its capital funds were not monitored on a regular basis and its accounting records were not accurate or updated timely. In addition, it did not accurately report obligations and expenditures to HUD, and could not support $91,027 in capital funds used to administer the program. HUD evaluated the Authority as a medium risk grantee requiring additional controls and oversight for administration of its Recovery Act funds. The Authority was allocated $381,631 in Capital Funds under the Recovery Act. HUD also concluded that based on the Authority's extended history of poor performance and lack of improvement, the Authority lacked the management capacity to successfully operate its federal public housing programs. Based on our review, we agree with HUD’s assessment. HUD also recommended that the Authority procure a contractor to manage its federal housing programs; and, the Authority was in the process of procuring a contract administrator.