We performed an audit of the New York City Housing Authority's (Authority) administration of its capital fund program as part of the Office of Inspector General's (OIG) strategic plan goals to improve the U.S. Department of Housing and Urban Development's (HUD) fiscal accountability. We selected the Authority based on the size of its capital fund program, more than $2 billion authorized and more than $1.3 billion expended in fiscal years 2001 through 2006, and our preliminary analyses of this activity in HUD's Line of Credit Control System. The audit disclosed that there were weaknesses in the Authority's controls over the obligation and disbursement of capital funds. Specifically, the Authority (1) lacked adequate documentation to support that all funds were obligated within prescribed timeframes, (2) charged capital funds for routine maintenance costs that should have been charged to the low-rent housing program, and (3) executed contracts with timeframes that exceeded those authorized by its procurement policy. These deficiencies occurred because the Authority did not have adequate procedures in place to (a) document that all capital grant funds were properly obligated within prescribed timeframes, (b) charge routine maintenance to the low-rent housing program, and (c) ensure that procurement terms complied with regulations. As a result, the Authority lacked support that $82 million was properly obligated, improperly charged $590,363 in routine maintenance expenses to the capital fund program, and executed contracts with terms that exceeded its policy limitations.

We recommend that the Director of HUD's New York Office of Public Housing instruct the Authority to (1) provide support that $82 million in capital funds were obligated within prescribed timeframes, (2) reimburse $590,363 to the capital fund program from the low-rent housing program for the routine maintenance costs charged, and (3) strengthen procurement controls to ensure compliance with its policy.