We completed an audit of the Lackawanna Municipal Housing Authority’s (Authority) administration of its capital fund program. The objectives of our audit were to determine whether the Authority disbursed capital funds and procured contracts in accordance with U.S. Department of Housing and Urban Development (HUD) requirements.

The audit disclosed that the Authority disbursed capital funds for questionable expenditures. Further, it did not follow HUD requirements, its own procurement policy, and New York State General Municipal Law when awarding contracts. Specifically, the Authority had no basis for charging management improvement expenditures to its capital fund program, charged the same expenses for multiple capital fund drawdowns, could not support the eligibility of charges, and improperly procured contracts and professional services. As a result, it lacked assurance that expenditures were necessary or reasonable, and that the services contracted for were provided as intended.

We recommend that the Director of HUD’s Buffalo Office of Public Housing instruct the Authority to (1) reimburse the capital fund program from nonfederal funds the $7,535 in excess drawdowns and the more than $2.6 million in costs associated with the lead abatement/modernization contract; (2) provide supporting documentation to justify the eligibility of $676,301 in questionable capital fund expenditures or reimburse the program from nonfederal funds any amounts not supported; (3) seek legal advice on whether the lead abatement/modernization contract should be rescinded in the best interest of the Authority; and (4) review and if appropriate, disapprove any future change orders associated with the lead abatement / modernization contract.