The U.S. Department of housing and Urban Development’s (HUD) Office of Inspector General audited the Housing Authority of the City of Terre Haute, Indiana’s (Authority) Turnkey III Homeownership program (program). We selected the Authority for review based on the results of our audit of the Authority’s nonprofit development activities (see Office of Inspector General audit report #2009-CH-1011, issued on July 31, 2009). The audit was a part of the activities in our fiscal year 2009 annual audit plan. Our objective was to determine whether the Authority followed HUD’s requirements regarding the administration of its program.

Under the direction of the former executive director and board of commissioners, the Authority did not comply with HUD’s requirements regarding the use of the program proceeds from the sale of its program units. The Authority did not maintain documentation to support that the sales proceeds were used in accordance with its approved program plan. As a result, the Authority and HUD lacked assurance that the sales proceeds benefitted low-income families.

We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to maintain accurate books of record to account for the activities and expenditures under the program and provide adequate supporting documentation for the use of the program proceeds from the sale of its program units. If the Authority cannot determine the activities and expenditures under the program and/or provide supporting documentation, it should reimburse more than $579,000 in sales proceeds to the program from nonfederal funds.