The Authority's program administration regarding housing assistance payment calculations and zero-income households was inadequate. The Authority did not effectively manage its housing assistance calculation and payment process in accordance with HUD requirements, resulting in nearly $57,000 in overpayment, more than $21,000 in unsupported payments and nearly $22,000 in underpayment for the period January 1, 2007, through August 31, 2008. In addition, the Authority improperly received more than $19,000 in program administrative fees for the households with incorrect and unsupported housing assistance payments. Based on our statistical sample, we estimate that over the next year, the Authority will overpay more than $96,000 and underpay more than $15,000 in housing assistance and utility allowances due to the Authority's calculation errors.

Further, the Authority failed to comply with its program administrative plan regarding zero-income household reviews. It did not effectively use HUD's Enterprise Income Verification system or other third-party verification methods to determine whether the households reporting zero income had unreported income. As a result, it unnecessarily paid housing assistance totaling more than $41,000 for households that were required to meet their rental obligations. The Authority also improperly received more than $6,000 in program administrative fees for the reported zero income households with overpaid housing assistance. Based on our statistical sample, we estimate that over the next year, the Authority will overpay more than $108,000 in housing assistance and utility allowances for households with unreported income.

We informed the Authority's executive director and the Director of HUD's Chicago Office of Public Housing of minor deficiencies through a memorandum, dated April 23, 2009.

We recommend that the Director of HUD's Chicago Office of Public Housing require the Authority to reimburse its program from nonfederal funds for the improper use of more than $123,000 in program funds, provide documentation or reimburse its program more than $21,000, and implement adequate procedures and controls to address the findings cited in this audit report. These procedures and controls should help ensure that more than $241,000 in program funds is spent on program administration that meets HUD's requirements over the next year.