We audited the Housing Authority of Whitesburg, Kentucky (Authority) pursuant to a request by the director of the Office of Public Housing, Kentucky State Office. Our objective was to determine whether the Authority properly accounted for cash receipts and disbursements, and made procurements in accordance with federal requirements.
The Authority badly mismanaged its operations. It did not properly account for rental receipts of about $134,889. It failed to prepare and file some quarterly tax returns and failed to deposit about $64,341 in federal withholding taxes with the Internal Revenue Service. It could not provide proper support for numerous disbursements totaling $264,229, and spent $29,347 for various unnecessary and/or unreasonable costs. The Authority failed to follow federal procurement regulations when awarding $446,918 in capital fund program contracts and change orders, and could not provide support for $275,282 in capital fund drawdowns. As a result, fewer funds were available for the Authority’s primary mission, and the Authority’s financial condition deteriorated to the extent that it was unable to fully meet its financial obligations. These deficiencies occurred because of ineffective management and lax internal controls, including insufficient oversight by the Authority’s board.
We recommend that HUD declare the Authority in substantial default in accordance with Annual Contributions Contract Section 17 and require the Authority take action necessary to (1) Establish an effective system of internal controls for all aspects of Authority operations; (2) Account for $134,889 in tenant rent receipts, provide support for $264,229 in disbursements and $275,282 in drawdowns; (3) Provide support that $446,918 in contracts were fairly and openly competed; (4) File missing tax returns and make all required tax deposits; and (5) Implement requested actions in the existing Memorandum of Agreement between HUD and the Authority. We also recommend that the Departmental Enforcement Center take appropriate administrative action against the Authority officials responsible for badly mismanaging its operations.
Recommendations
Public and Indian Housing
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Status2010-AT-1003-001-DOpenClosed$134,889.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Require the Authority to account for $134,889 in tenant rent receipts or repay any unsupported amounts to its public housing operating program from nonfederal funds.
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Status2010-AT-1003-001-FOpenClosed$264,229.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Require the Authority to provide support for $264,229 in disbursements or repay any unsupported costs to its public housing operating and capital improvement program from nonfederal funds.
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Status2010-AT-1003-001-GOpenClosed$2,250.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Require the Authority to reimburse its public housing program $2,250 for ineligible costs using non-federal funds.
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Status2010-AT-1003-001-HOpenClosed$27,097.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Require the Authority to support the $27,097 in unreasonable costs or reimburse its public housing and capital improvement program from nonfederal funds.
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Status2010-AT-1003-001-IOpenClosed$446,918.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Require the Authority to provide support that $446,918 in contracts were fairly and openly competed or reimburse its public housing and capital improvement program from nonfederal funds.
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Status2010-AT-1003-001-JOpenClosed$275,282.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Require the Authority to provide support for the $275,282 in capital fund drawdowns or reimburse its capital improvement program from nonfederal funds.